RoadMap to Growth Introduce myself Introduce the program In the first quarter of 2004 we conceived of this program as a result of other work we were doing During the summer we prepared a proposal with the ODoD that we submitted to the Economic Development Administration The proposal was accepted by EDA at the end of September 2004 and we are Delivering the _____ seminar of that proposal today. We were not working in a Vacuum We have enlisted the support of other local organizations that have a common interest in seeing a strong manufacturing sector in NE Ohio and specifically here in____________. The ____________ has graciously agreed to support this effort and has provided important planning and promotion efforts for the program. I would now like to introduce ___________ of the _____________ who will briefly describe some of the great things they are doing for the community. Introduce CAMP Growth Planning is a logical extension of the operations consulting we have been doing for so long with our clients.

Today’s session will help you Understand why growth planning is so important for your company Learn a breakthrough methodology for growth planning that yields results you can implement and sustain profitably Learn about companies that have used growth planning successfully to achieve significant results With sample tools that you can use to help start your own growth planning process So much for the advertisement now lets look at the main topics for today’s seminar. You will see that this about you, your company and your success. Discuss points of slide. Transition I have already discussed how we got this program started with EDA but lets talk about what is happening in our environment that is causing growth planning to be of absolutely critical importance for manufacturers

WEAK DEMAND AILS MANUFACTURING NATIONALLY Demand is the Issue WEAK DEMAND AILS MANUFACTURING NATIONALLY Increased Global Competition Reduced US market share Weak Exports Down significantly from their peak High Levels of Inventory Sales of already manufactured goods reduces production levels

IN SPITE of… There IS HOPE. The impact of 9/11 The impact of outsourcing to overseas suppliers The 2000 recession In the 50’s, 60’s and 70’s NE Ohio was the place to be for manufacturing We were generating growth for manufacturers that generated jobs and economic prosperity for the region But that is old history Today those same companies that prospered before are “old line” manufacturers today The so called “Old line” companies are struggling to generate sales and have been very focused on reducing costs to stay viable But let me tell you about some additional work CAMP has recently done We have been studying the business sectors in the NE Ohio region One key finding suggests that there is significant hope for companies that respond properly to the market conditions We have found that almost none of the sectors in the region have truly disappeared during the recent downturn We have also found that in each sector there are companies in the top quartile that have significantly outperformed other, similar companies This means that there are actions that you can take that will have a significant positive impact on your competitive position This is why growth planning is so important to you and your company. You too can be a survivor. There IS HOPE.

What’s Giving you Pain Today? Competitors are cutting prices to gain business New competitors from overseas Customers are in declining markets Customers are going out of business Customers have strategic buying power keeping your prices low (Walmartized) You require a key raw material whose price is volatile Now lets look at the specific market influences that are working against the companies that are here today. (Each line is timed to fly in separately Ask for show of hands re their pain Ask if anyone wants to share) Have we covered everyone in the room with this list or is there something we have missed? Transition These are the market factors that are impacting you. In most cases you have absolutely no control over them but they have a significant impact on you. Well what can you do to address these factors?

Choices Grow Sell (Exit the market) Do More of the Same Well you really only have 3 choices, you can grow, sell your business, or you can do more of what you are already doing. And there really are only 3 choices! Lets start with the last option, “do more of the same” We already discussed how painful the current situation is for all of you but lets spend a minute discussing this option More of the same really means competing on price. Why?, because competitors are going to take away your existing competitive position over time. How many here are the lowest cost producers in their market? How many here believe they could be the lowest cost producer in their market? If you cannot be the lowest cost producer in your market then you must differentiate yourself if you are to survive. Remember there is only one low cost producer in any market. Selling part or all of your business is a legitimate option for the company’s growth I truly believe some businesses should be sold. Too many business create excess capacity that is driving the market price down bringing all companies in the market down with it. Those weak competitors should close! Growth is the last option of the three. What happens when you don’t grow? (Ask audience) Lose competitive position and profits and you can no longer retain or obtain key resources for your business. Top people do not want to work for a company that is asleep at the wheel.

Avenues of Growth Transition In So growth is really the only option for most companies. You probably already realized this and that is why you are here. But what choices do I have for growth? Slide Discussion Discuss each option briefly and spend enough time on Business Agility and Capacity/Quality building to make sure everyone knows what they are and why they are a part of the program. Also make sure that you tell people that Mergers are included in the program as a part of Acquisitions/Divestiture. Transition Out Much of the rest of the seminar today we will discuss: How you decide which combinations of these strategies make sense for you We will give you some examples of companies that have used the strategies And you will get some tools you can take home and use tomorrow.

Breakthrough Growth Planning Methodology Implement Breakthrough Growth Plan Breakthrough Growth Planning Methodology New Products Acquisitions/Divestitures Partnering/Licensing Business Agility/Services New Channels Capacity/Quality Building Set Growth Goals & Initiate Program Evaluate Breakthrough Potential Identify Growth Opportunities Finalize Breakthrough Plan (This is a reverse build slide) What you hope to end up with is a combination of growth options that will give you competitive advantage in the market place…(discuss each main deliverable for each step and refer the attendee back to the step before for the requirements to complete the step) The key thinks to focus on here are: The process is market driven not internally driven. It uses market perspectives to give insight into growth choices It is based on your internal situation and the profits levels you need to maintain. Growth can be done while you earn a profit. It focuses on what is really important for analysis so that you can get results with only the work that must be done It is a way of think going forward not just a one time project. This is the process you will see during the rest of the seminar. We will continually refer you pack to this process. If you get lost during the discussion raise you hand and ask us to bring you back. Market Development / Penetration Manage Program

How is the Breakthrough Methodology DIFFERENT? Focused on SUSTAINABLE GROWTH, not cost cutting Driven by CUSTOMERS and POTENTIAL CUSTOMERS not internal perceptions COMPREHENSIVE yet covers only what is important Designed for manufacturing companies of ALL SIZES Focused on IMPLEMENTATION for results It’s PROVEN! At the end of this process you will end up with a comprehensive plan that will likely deliver sustainable growth for your company. Keep in mind that this process works and it has been proven by companies similar to your.

Breakthrough Growth Planning Methodology Implement Breakthrough Growth Plan Breakthrough Growth Planning Methodology New Products Acquisitions/Divestitures Partnering/Licensing Business Agility/Services Now lets look at the first step in the process. This is how you get started. New Channels Set Growth Goals & Initiate Program Evaluate Breakthrough Potential Identify Growth Opportunities Finalize Breakthrough Plan Capacity/Quality Building Market Development/Penetration

A Vision and Plan for Growth Set Growth Goals & Initiate Program A Vision and Plan for Growth SUCCESSFUL GROWTH COMPANIES… PLAN for their future growth THINK LONG TERM about where they want to be in 10 years or more Use this Vision to DRIVE KEY STRATEGIES AND DECISIONS Develop a HARD VISION GOAL – How much and by when? This whole effort is about the future of your company. You cannot adequately plan for your future if your are only looking at annual bites! Many truly breakthrough growth strategies take longer than a year to realize. Think about 5-10 years as a reasonable timeframe for your efforts The next part of this work is to develop specific goals that you want to achieve. These should not necessarily be goals that are easily achieved because they will not drive you to breakthrough options if they are. Some call this a BHAG (beehag). A Big Hairy Ass Goal. Again the reason for this is to stretch the organization beyond the average. The outcomes of this step are: Timeframe for planning Desired level of growth Desired profits, and An outline for the rest of the work These outcomes can be achieved by with a half-day facilitated meeting of the key executives in your organization.

Breakthrough Growth Planning Methodology Implement Breakthrough Growth Plan Breakthrough Growth Planning Methodology New Products Acquisitions/Divestitures Partnering/Licensing Evaluate Breakthrough Potential Business Agility/Services Once you know where, at a high level you want to go, you can begin the assessment of your breakthrough potential. In this step we will look at your internal capabilities and markets you are currently in. The next few slides are going to include a series of tools you can use to complete this work. Keep in mind that success in the step will come by obtaining and using information from your customers, potential customers and competitors. Al of them are outside of your organization. New Channels Set Growth Goals & Initiate Program Evaluate Breakthrough Potential Identify Growth Opportunities Finalize Breakthrough Plan Capacity/Quality Building Market Development/Penetration

6 Questions to Guide Growth Planning Viewpoint Internal External Decision Evaluate Breakthrough Potential Who are your BEST CUSTOMERS now and in the future? Do you use LOST ORDER ANALYSIS to understand the specific reasons you are losing orders to competitors? Do you know if you are making ADEQUATE MARGINS on each product for each customer? Do you know what kinds of PRODUCTS AND SERVICES your best customers want? Can you compare your products and services in every way to your COMPETITORS’ in all the markets you serve? Do you know where your NEXT MARKETS are? This slide shows 6 questions that you can quickly use to get your thinking started about this step. Some of the questions can be answered from information you gather internally but some of them require external information you need to gather. In the handout packet you will receive when you leave you will find a significantly more detailed version of this 6 question guide. You can use this questionnaire to see where you have missing information that will be useful to the growth planning effort. When you get back to your company start the process by completing the questions to the best of your ability. The key to the internal analysis is to understand what may be limiting your ability to grow. So this is where we will go next.

Where is Your Business Headed? Evaluate Breakthrough Potential Victory Roll or Death Spin? I know at most companies everybody is working really hard and we often feel like we are spinning in circles trying to make things work. The problem is that you often have same feeling of busyness when you are successful as you do when you are dying. If you think back to the 3 choices you have for growth (More of the same, Sell and Grow) you may have recognized that more of the same is really the start of a death spin unless you are the true low cost competitor and it is sustainable.

Confront the Facts: Your Options Depend on Your Position (Financial) Evaluate Breakthrough Potential Income Growth Options Cash Flow Balance Sheet Best time to start growth planning. Longer-term options with higher rewards are possible. + + + If your financials are good you have many more choices for success and much more time to implement growth plans than you do if you are failing. But what ever the case is you must confront the facts. Some growth options require more cash than do others. The problem is the low cost options often are not the ones you will need for true long term success. One of the key efforts you must take at this stage is to make sure you know exactly what it costs you for each product you make for each customer. If you are operating your business with manufacturing cost estimates you need to get better data. Let me explain why: Lets say you develop a super grow strategy that involves selling your existing products to new customers and you are wildly successful. If you are actually losing money on every product you sell you will just accelerate your death spin. Not only do you need to confront yourself with the reality of your current financial situation, you need to look at the limitations of your operations. + - + Should have started. Some longer-term options may not be possible. Growth options must provide quick, positive results with little investment. - - + - - - About to crash. Need triage. Must act today.

Confront the Facts: Your Options Depend on Your Position (Operational) Evaluate Breakthrough Potential Category Inadequate Adequate Good Production Capacity Lead Times Quality This is a sample operational evaluation. It is based on our opinion of what is important to the customer in our existing markets and how we feel we are doing at delivering against each category. This information will be validated during the market analysis in this step but some external issues are driven by a number of factors that the customer sometimes doesn’t see. This analysis may also be required later when we begin to identify alternative markets. The criteria that is important for those markets will help us identify what we must change in capacity/quality to address the new market. Information Systems Control over Sales Channels Productivity Technology

Confront the Facts: Your Options Depend on Your Position (Organizational) Evaluate Breakthrough Potential Dimension High Medium Low Clear Mission: All employees know the mission and have aligned their performance goals to it  Bench Strength: The company continually invests in developing employees’ skills to align them with the company’s performance needs How many of you have read Jim Collin’s book “Good To Great”? The first thing he said successful good to great companies do is get the “right people on the bus”. We must confront the facts of our personnel if we are to grow successfully. People are a key part of your ability to grow. If your organizational structure and your team are not up to the task your likelihood of success is not great. One of the keys to success here is to understand how well everyone knows the mission and well the individual performance goals align with the mission. Another key area impacting growth are your sales personnel. If you are anticipating using field sales for your growth it is important to understand if that team is up to the task. Clearly, if they are not you may wish to investigate alternative channels for your growth plans. Plans like acquisitions and mergers require significant strength on your management team. If you do not have the strength you need you may wish to make a strong management team part of the selection criteria for you purchase. Some of these attributes can be strengths of a company and may provide the foundation for growth as well. Growth is not only about fixing your problems it is about uncovering your strengths and developing programs that play to your strengths. We will look again at strengths and weaknesses in later steps of the process.  Systems to Support Performance Goals: The company clearly defines what and how to accomplish its goals  Effective Communication: Operations and customer service communicate well (and with the outside world) 

Know the Profitability of your Customers Sales $ Cost $ Sales Cost to Serve Adjusted Direction   (000) Margin Factor Cost of Sales A 1400 1100 21.43% 1 UP B 1950 1600 17.95% 1.1 1760 9.74% C 1250 1000 20.00% 1.25 0.00% STEADY D 1850 1550 16.22% 0.75 1163 37.14% DOWN Know the Profitability of your Customers Example Method Evaluate Breakthrough Potential High Revenue Do you all know that not all customers are created equal? Some are vastly more profitable than others. This is a tool that you can use to understand which of your customers are generating you the most profit today and which ones will likely be generating the most profit for you tomorrow given the existing trends. One of the problems with understanding customer profitability is that we rarely capture the true cost of servicing each customer in our financial statements. We may well get the tangible costs to serve our customers but there are usually a series of intangible costs that we must factor in. We sort of call this the “pain in the neck factor”. This is usually the cost of customer service that they force the company to incur through their persistent questions, problems, changes, etc. The pain in the neck factor can be estimated for each customer and used to inflate the actual reported costs for analysis to a point that more nearly reflects their benefit to you. Once this is done you complete the matrix for each customer and plot the customers in the diagram. Low Low Cost to Serve High

Know the Profitability of your Customers Evaluate Breakthrough Potential Wabco High Revenues Here is a completed example. The diagram shows where the customer is today and the direction they are headed. If a customer is not changing position on the chart they have no arrow. Ideally all of your customers would be in the upper left quadrant where the cost to serve is lower and the revenue is higher. You may elect to develop strategies that can change the dynamics of the analysis. For example, you may elect to develop a new channel for high cost customers and give them economic incentives to use it. You may also use the analysis to help you understand the attributes of your most profitable customers. This would then give you a basis for searching for additional prospective customers with similar attributes to try and engage with your sales efforts. Transition Identifying what customers to target is one thing developing a winning set of products and services is another. To help us be successful with this endeavor we need to look outside the company. We start the external analysis by defining the markets we are in. GM Electrolux TRW Low High Cost to Serve

What is your MARKET? A combination of CUSTOMER SEGMENTS and GEOGRAPHY Evaluate Breakthrough Potential A combination of CUSTOMER SEGMENTS and GEOGRAPHY These segments must be defined by MEANINGFUL VARIATIONS IN BUYING DECISIONS across your customer base Segments can also be defined by: INDUSTRY FUNCTION & USE SIZE SPECIFIC CUSTOMERS What makes sense for YOUR company? Customer markets are based on distinctive buying patterns by specific customers. Once you understand the variations in buying patterns you can group like customers and start the external process. Start you market analysis by collecting published data about your market from public sources like trade associations, industry experts, university personnel and others familiar with you markets. Don’t assume you know all there is to know about the market. This is a failure mode that can easily be avoided by just making some phone calls. What you want to know is the overall market growth rate, the factors that are effecting your market and their likely impact today and in the future. You want to know if your existing markets will support the growth goals you set earlier. Transition Once you have the publicly available data you need to get the voice of the market players to really understand what your options are.

Know Your Markets by Hearing the Voice Of Your Customer Evaluate Breakthrough Potential Our experience shows that a company’s internal view of what is important to its customers is often inaccurate. Using inaccurate (internal only) perceptions to drive growth planning is very risky. A “best practice” in growth planning is to conduct customer, potential customer and competitor research using a third party doing anonymous interviews It may be a surprise to you but not very many companies really know their existing markets well enough to develop sustainable growth strategies. Getting an external voice into your process is absolutely critical for success. Not only does that external voice need to include your existing customers but it must also include potential customers, lost customers, and competitors. Get a third party to do this work for you because your customers will be much more open with them than they will be with you. A company that will not allow their customers to be contacted will not likely succeed with growth planning. It is that simple. Transition Once you get over your bias against such activities you can begin to develop call scripts that get what you need to know.

What To Ask Your Customers… Evaluate Breakthrough Potential You need to understand the factors that drive your customer’s decisions in the marketplace Customer 6 Customer 5 What the market place looks like to your customer? Customer criteria for selecting suppliers? Customer approach for selecting suppliers? Why are some suppliers used more often than others? Customer views of target suppliers? Competitor A Customer 4 You Customer 3 This is not a statistical survey process. It is a business conversation with business people about business issues. From a Customer perspective you ask: What criteria does the customer use to select its suppliers? What process does the customer use to select suppliers? Who supplies the customer today? How does the customer view the various supplier choices available? Product choices? (including you and your products) Much insight can be gained by comparing and contrasting the responses from customers and non-customers as you develop growth strategies to win the profitable customers to your organization. Customer 2 Competitor B Customer 1

Sample Competitor Analysis Evaluate Breakthrough Potential Value Map 10.0 8.0 7.0 9.0 6.0 Price High (low rating) Low (high rating) Value Competitor 4 Competitor 2 Competitor 3 Fair Value Line Gain Market Share Lose Market Share Competitor 1 XYZ Co. The last tool I would like to show you in the Market Analysis is the Value Map. As a result of the external research you have done you can plot the various competitors on a chart like this one.

Process Check-in: Where Are We? Set Growth HARD GOALS Set Growth Planning TIMEFRAME Establish Growth Planning PROCESS Looked at internal capabilities for: FINANCIALS, ORGANIZATION and PROCESSES Looked at the situation from the MARKET PLAYERS’ PERSPECTIVE Set Growth Goals & Initiate Program Evaluate Breakthrough Potential Lets get ourselves back on track with where we are in the methodology. We began by looking at the Hard growth and profitability goals you have for your organization and what the timeframe is for their achievement. We then discussed the need to develop a growth planning plan to outline the work that would come next. We then discussed the internal and external analyses you can do to help you get a better picture of what will help and what will hinder your growth plans. We focused on the financial aspects of your business and discussed the organizational and operational things to consider. Then we when external and talked about getting a market perspective on you and your competitors from customers in the market. Transition All of this work will prepare you to begin the Identify Growth Opportunities work that comes next. Evaluate Breakthrough Potential

Breakthrough Growth Planning Methodology Implement Breakthrough Growth Plan Breakthrough Growth Planning Methodology New Products Acquisitions/Divestitures Partnering/Licensing Evaluate Breakthrough Potential Identify Growth Opportunities Business Agility/Services What you will see in the next few slides is how to identify growth strategies and then how evaluate whether they are the right strategies for your company. You can see from the slide that the next two steps are iterative. By that I mean that you may need more than one pass through the step to get your plan finalized. Next we will begin the next two step discussion focusing on Identifying Growth Opportunities. New Channels Set Growth Goals & Initiate Program Evaluate Breakthrough Potential Identify Growth Opportunities Finalize Breakthrough Plan Capacity/Quality Building Market Development/Penetration

Growth Options Tool Products Markets New Old Old New Identify Growth Opportunities New Products This is a tool that we use to begin the process of understanding what types of growth options we might select. The tool uses markets and products as a way to look at your strategy choices. For example, you could potentially sell your existing products into new markets you do not serve today. That would be in the old products/new markets quadrant. Or you might decide to develop new products for your existing markets. That strategy would put you in the new products/old markets quadrant of the matrix. One thing that is important for you to note is that, by definition, you are currently in the old markets/old products quadrant when you start the planning process even if you have just started a new strategy that you believe contains new products or new markets. As soon as you roll the strategy out it becomes old/old. Another thing to understand with this tool is that the risk associated with potential success of each strategy is different in each quadrant. This is generally because knowing more about your markets and products at the start of the strategy planning process helps you make better decisions. I will show you how risk plays into your strategic thinking as we go into more depth on following slides. Generally speaking risk and reward go hand-in-hand. The implication of this on the matrix is that as you select riskier strategies you expect the return from that strategy to be greater. So lower risk strategies generally generate lower returns. Some of the art of this process is developing tactics that go with your strategies that work to reduce the risk you are taking on. I will talk more about this as we go forward as well. Now lets see some examples of how you can use this tool. Old Old Markets New

Growth Options Tool Stable or Growing Current Markets Identify Growth Opportunities New Products Remember when we discussed the market analysis in the second step, Evaluate Breakthrough Potential? One of the data points we wanted to gather was information about the current markets you serve. This is important because if your current market is at least stable or even better growing you have the most growth strategy choices. How many of you are in stable or growing markets? The colors in the quadrants of this matrix show that the lowest risk strategy available may well come from your existing products and markets. The old/old quadrant. You should plan on strategies to optimize your growth in your businesses. This is probably an excellent place to start your growth plans because you can probably address these markets in the relatively near-term. But if you set your growth goal high enough in the beginning, you will probably find that the old/old quadrant will not generate enough growth to meet your goal. So you will need to augment your old/old strategy with some additional choices. As you can see from the matrix either of the new/old quadrants will provide you with moderate risk and moderate return alternatives. As it turns out strategies in these two quadrants generally require a moderate amount of time to implement, although this is not always the case. Strategies in these two quadrants also assume that you can find alternative uses for your existing products or that you can find new products for your existing customers. Anyway, look to the old/new quadrants after you have built your old/old strategies. Again these are generally good mid-term strategy options. One of the things we mentioned early in the presentation was that you planning horizon should be at least 5 years and probably 10 years in length. By selecting high growth objectives and longer term planning horizons you can include new/new strategies in your plan. In fact you my need them to reach your goal. One key thing to remember is that if you are going to select strategy options in the new/new quadrant you should make sure that you have some connection, either in skills or knowledge, to the markets or products you select to help minimize your risks. We have a concept you can use to help you think through this connection later in the presentation. Transition: In this situation your core business is strong, now let’s look at another situation Old Old Markets New

Growth Options Tool Declining Current Markets Identify Growth Opportunities New Products If your current markets are declining your chances of getting meaningful and profitable growth from the old/old quadrant are not good. How many of you find your current markets are declining? We already discussed this situation a bit at the beginning of the presentation. Most of the time when this occurs you are faced with declining margins and competitors that are willing to underbid jobs just to stay alive. If you are not the low cost producer than over time you will go broke trying to win more business in these markets. Strategies for these markets must be driven by cost and productivity. But you do have some growth choices. And the first place to look is in taking your old products to new markets. This would be your best growth strategy for the relatively near term. You might then support these mid term strategies with strategies that could be considered new/new. Remember when we did the financial analysis in the second step. One of the key things to think about is to give yourself enough time to implement growth strategies. If you have waited too long to develop growth strategies you may not have enough time to implement these strategies. When you are in declining markets you must begin to develop new growth strategies as soon as you possibly can to keep the most options available to you. Transition: In this situation your markets are weak but your products or technology may be strong. Now let’s look at another situation. Old Old Markets New

Growth Options Tool Outdated Technology or Products New Products The alternative to the last situation is when your products or technology is out of date or no longer competitive. In this situation your best option in the shorter run might be to develop new products for your existing markets and augment that strategy with a new product/new market strategy in the longer term. A way to think about the new product/new market strategy may be to adjust some of your existing products or technology for use in new markets. This could help mitigate the relatively higher risk of this type of strategy. Transition: The idea with the product/market matrix is to give you some options and ideas about how to develop a growth plan. It takes into consideration the your growth goals, your existing situation, the risks of the alternatives and the returns you might get. But this is just the starting point for evaluating the choices you come up with. In the next step of the process we will look at the evaluation process in more depth. Old Old Markets New

Breakthrough Growth Planning Methodology Implement Breakthrough Growth Plan Breakthrough Growth Planning Methodology New Products Acquisitions/Divestitures Partnering/Licensing Evaluate Breakthrough Potential Identify Growth Opportunities Finalize Breakthrough Plan Business Agility/Services In the Finalize Breakthrough Plan step of the methodology you evaluate the costs, benefits and implementation effort of the chosen growth strategies to ensure that they meet your company’s needs. As we said earlier, this step and the prior step are often iterative because it is not uncommon for the total of the implementation plans to be too costly or too long in implementation. When this is the case you should revisit the Identify Growth Opportunities step. Transition Now lets spend a few minutes to discuss how you do this step. New Channels Set Growth Goals & Initiate Program Evaluate Breakthrough Potential Identify Growth Opportunities Finalize Breakthrough Plan Capacity/Quality Building Market Development/Penetration

Need to Develop & Test ALTERNATIVE Growth Choices Finalize Breakthrough Plan Considerations: Likely cost Likely benefits (how do they support my hard goals?) Timeframe Risk Organization’s ability & readiness to deliver Verifying and Finalizing the plan means challenging and validating all assumptions and growth options. This slide shows the general criteria for evaluating the growth choices you have selected. Some of these criteria were already evaluated at a high level by using the product/market matrix as a starting point in the last step. But here we are completing a much more detailed analysis of your choices and the implementation choices you have elected. One issue of importance that we discussed back in the Evaluate Breakthrough Potential step we discussed earlier is your organizations ability and readiness to deliver the proposed strategy. We discussed it in the internal analysis section of the methodology. In that step we looked at the internal capabilities of the organization because we want to know if our people and organization structure must be augmented during the strategy implementation process. Let me give you an example, lets say you are planning on entering a new market through the acquisition or another company or product line. This is a relatively expensive and risky alternative. In fact, many acquisitions fail not because the company’s strategy was bad but because the acquiring organization was ill prepared to complete the integration of a business that usually has a completely different culture. To address this risk we may want to hire experts to help us develop a detailed integration plan and this cost and effort must be considered as part of the implementation and as part of the evaluation. Transition As this discussion suggests their may be alternative ways to achieve specific strategies. So lets look at the choices you might have.

Many Paths to Achieve Results Finalize Breakthrough Plan Implement Breakthrough Growth Plan Strategy: Increase sales of Existing products to Existing markets. What action could I take? Business Agility/Services New Channels Capacity/Quality Building New Here we are back with the product/market matrix we used in the last step. We are going to start by talking about the old/old quadrant. In this quadrant you have several choices available as growth strategies. For example: You could increase the sales of your existing products to existing customers by bundling them with new, value added services. Another choice might be to develop a new channel to market. Many companies today have found eCommerce as a way to achieve this strategy. You might not believe it in this economy but there are companies out there that are limited in their growth potential because they cannot produce enough and they need to build capacity. And finally, you might elect to develop new marketing materials or re-brand your companies or products to compete more effectively. More than likely you will use a combination of these strategies to reach your goal. For example you may implement new services that increase your volume so that you need to develop capacity. You will likely need new marketing materials to present your new offering. These strategy options are designed to be used in combinations and are not exclusive of each other. Now let me give you an example of a company that used this strategy. (Joel case #3) This company is a promotional products manufacturer. Growth had slowed because there were not able to effectively reach their potential OEM market. The company also found that its cost to serve its customers was becoming prohibitive. The company needed to grow. Through growth planning process, analyzed customers’ use of the product, and their wants and needs and found a potential strategy. Many customers bought their product and shipped it to their distributors for use in regional and local promotions. Customers incurred distribution costs and other promotion costs. The result was a strategy to design a direct fulfillment program to sell and ship directly to their customers’ distributors. The Company need to develop product warehousing and fulfillment competencies. The new channels was responsible for causing growth in 2 ways: It Eliminated redistribution and invoicing hassle for customers so customers increased the number of promotion products available and the frequency of their promotions and this increased demand and volume, and Their new competency enabled them to sell a differentiated product to new customers. Products Old Market Development / Penetration Old New Markets

Many Paths to Achieve Results Finalize Breakthrough Plan Implement Breakthrough Growth Plan New Products Acquisitions/Divestitures Partnering/Licensing Business Agility/Services New Channels Capacity/Quality Building Strategy: Sell New products to Existing markets. What action could I take? New Next lets look at your implementation options if your strategy is to develop new products to existing markets. In this case all of the implementation options exist. For example: To get the new product you might go through an ideation session to begin the internal design and development process you might use for new products. But you could acquire or merge with another organization to get the products you need. Another alternative might be to partner with another organization so that you can offer their products to your customers. You may also elect to bundle these new products with new services or a new delivery system that improves your agility. Or the new products may be sold through new channels to your existing customers Again notice how the implementation choices can work together. Has anyone gone through the process of implementing new products for existing markets? What was your experience? Products Old Market Development / Penetration Old New Markets

Many Paths to Achieve Results Finalize Breakthrough Plan Implement Breakthrough Growth Plan Acquisitions/Divestitures Partnering/Licensing Business Agility/Services New Channels Capacity/Quality Building Strategy: Sell Existing products to New markets. What action could I take? New If your strategy is to sell your existing products into new markets you also have many choices available to get results. For example: You could acquire or merge with a company that is already in that market that might have complimentary products to mine Or you might partner with a company that would like to sell your product into its markets Another choice might be to develop new channels to reach the new customers Again the strategies used in combination to generate the desired results. Have any of you used this strategy in the past? What was the outcome? Let me tell you about a company that used this strategy. (Joel case #2) This is a company that manufacturers industrial clutches. Originally the company sold to OEMs, they developed a strategy of selling replacement parts for old industrial machine tools which was a market they did not currently serve. In the growth planning process the company identified the aftermarket opportunity for older machines. There are thousands of these older machines in operation that use numerous clutches. This market has higher growth potential and potentially higher margins. Many of the makers of these machines were out of business or not investing in the aftermarket. So replacement clutches could be sold at up to 4 times what OEM’s were paying for the custom clutches in new equipment. The result required some adjustments to the products design and operations had to change from a job shop to a build for inventor system. The company also needed new sales and marketing approaches. It took 3 years to fully change and serve the entire chosen niche market but it delivered exceptional growth and profitability. Products Old Market Development / Penetration Old New Markets

Many Paths to Achieve Results Finalize Breakthrough Plan Implement Breakthrough Growth Plan Strategy: Sell New products to New markets. What action could I take? New Products Acquisitions/Divestitures New Partnering/Licensing If your strategy is to develop new products for new markets all of the implementation options are available for your use. Your strategy will require new products which you could get either by developing the products or getting them from the outside through acquisition or partnering. You will need to develop the markets and channels you will use and you may need to develop the capacity to manufacture the product. An integrated set of options and choices. Have any of you gone through this strategy? Let me tell you about an example of this strategy (Mike Collins – American Made LLC). The company sells products used as truck liners. It decided as a result of a growth planning effort to use its existing technology to sell new products to new markets. They looked for new markets and found they could use their technology in refrigerated train cars and on auto bumpers. The result was the creation of translucent roofs for use in walls and ceilings of refrigerated trailers and railcars. Also can be used for molded auto bumpers, containers and for military applications. They are now also selling the material for use by other manufacturers. Business Agility/Services Products New Channels Capacity/Quality Building Old Market Development / Penetration Old New Markets

How Do I Decide WHICH Growth Options to Choose? Finalize Breakthrough Plan Answer 2 questions What do we need that can be filled by a new product, acquisition and/or partnership? (Needs Analysis) Where can we apply our existing people, processes and technology? (Exploitation Analysis) The interesting thing about growth planning is that not all strategies are created equal. Even though two strategies may generate the same revenue some are better than others. Let me explain what I mean. A strategy that delivers something in addition to the sales that I can use might give me additional choices later on or may help me be more efficient in my operations. Or, a strategy that exploits something I have may be a lower risk than a strategy that does not. Transition Let me give some examples of what I mean.

Exploitation Analysis Deciding WHICH Growth Options to Choose Finalize Breakthrough Plan Example Needs Analysis Involved in a cyclical or seasonal business Rely on a few customers Slow / no growth industry Quotes are competitive and cost driven Rely on sales reps and distributors Exploitation Analysis Highly skilled people and engineered to order products New and flexible manufacturing facility with extra capacity Large conveniently located warehouse Lets say you are in a very cyclical or seasonable business. A strategy for a new product that is sold with the same cyclicality or seasonality might give you sales but increase your operating and revenue issues related to the seasonality. A good example of a business that has developed a counter seasonal strategy are the stores that sell pool supplies. Almost everyone of those stores also sells artificial Christmas Trees in the off season. It uses resources and generates revenue during the off season. This is an example of a business that used growth planning to generate “better growth”. The way you develop use this evaluation is to create a list of your needs and the potential strategies that could be used to address those needs. This can be done through a series of facilitated meetings that identify then refine the list. Once the list is finalized it can be weighted and then each strategy option can be compared against the list to see which ones best address the needs. It is sort of a yardstick for comparing options. This process can also include areas of opportunity that you could exploit. Transition Once you have the list of strategies you want to select you can complete the evaluation process.

Growth Option Evaluations Finalize Breakthrough Plan Growth Option Evaluations Growth Options Cost Financial Return Risk Lead Time Organization Readiness New Products M-H H M-H H M Acquisitions As I said earlier the growth options you select each have different attributes to consider. Some are more costly to implement, some provide more risk. Some are just harder to get done. For example, generally New Products have a relatively high cost to create but they generate better returns than say Market Development of your existing markets. Your analysis should consider all of these factors but should be based on real information not high, medium, or low estimates. You should lay out the costs, benefits, risks, lead time and organizational issues with each of the strategies you select alone and together to ensure the whole picture is one your company can be successful with. Transition Remember if the analysis of the combination of all the strategies does not work for what ever reason the process is iterative. H H M-H M-H H Partnering/Licensing L M M-H M-H L Business Agility/Services L L-M L L-M M New Channels L-M L-M L-M L-M M Capacity/Quality Building L-M L-M L L-M L-M Market Development/Penetration L-M L-M L L-M L

The Process is Iterative As you do your work in “Finalize Breakthrough Plan” phase you may find that the growth opportunities you identified need to be adjusted because of cost, timeframe, risk, etc. When this occurs you can revisit the “Identify Growth Opportunities” phase to select new options to evaluate. This process continues until you approve and then finalize the plan. Identify Growth Opportunities Finalize Breakthrough Plan Identify Growth Opportunities Finalize Breakthrough Plan You may have to step back one or two times and revisit the process of identifying opportunities until you are satisfied. It is not a failure to go back but a refinement of the results. We are not advocating analysis paralysis but the strategies you select must achieve your goals for this to be a successful process.

Breakthrough Growth Planning Methodology Implement Breakthrough Growth Plan Breakthrough Growth Planning Methodology New Products Acquisitions/Divestitures Partnering/Licensing Business Agility/Services New Channels Capacity/Quality Building New Products Acquisitions/Divestitures Partnering/Licensing Evaluate Breakthrough Potential Identify Growth Opportunities Finalize Breakthrough Plan Business Agility/Services Now we have discussed all 4 steps in the Breakthrough Growth Planning Methodology. The plan will contain specific growth strategies that you will use. It will be specific to your needs and your strengths and it will be comprehensive. But… New Channels Set Growth Goals & Initiate Program Evaluate Breakthrough Potential Identify Growth Opportunities Finalize Breakthrough Plan Capacity/Quality Building Market Development/Penetration Market Development / Penetration

MUST The BREAKTHROUGH Growth Plan BE IMPLEMENTED TO ACHIEVE RESULTS! New Products Acquisitions/Divestitures BE IMPLEMENTED TO ACHIEVE RESULTS! Partnering/Licensing It must be implemented to really achieve results Business Agility/Services New Channels Capacity/Quality Building Market Development / Penetration

Why the Roadmap? As we said at the beginning of this event these are the strategic choices you have. After we are done with the official part of the seminar we will have people at the tables in the back to discuss these strategic choices with you in more detail if you would like more information about them. These choices are not new, everyone knows them. The key to this process is selecting the right options for your company, and that requires a methodology.

Because it is…. Focused on SUSTAINABLE GROWTH, not cost cutting Driven by CUSTOMERS AND POTENTIAL CUSTOMERS not by internal perceptions COMPREHENSIVE yet covers only what is important Designed for manufacturing companies of ALL SIZES Focused on IMPLEMENTATION for results PROVEN! And the breakthrough methodology results in plans for sustainable growth that you can use to get results.

What Now? DO SOMETHING! Take the time to plan... Get help if you need it... Doing nothing is really NOT an option, so… DO SOMETHING!

THANK YOU for coming! In the materials you already have you will find a seminar evaluation. Please complete the evaluation and turn it in to Phoebe and she will provide you with your handout materials for this event. One of the questions on the evaluation asks for your investment for today. What we want you to do is to understand that this is the amount of money you have invested to start your growth planning effort. You should include all of your out-of-pocket costs for coming to the seminar and the cost for your salary and overhead for attending. What we hope is that in 12 months this investment will grow at least partially as a result of this event. If you are interested in learning more about the potential growth options we will have people at the tables in the back to answer you questions. Thank you very much for your kind attention today and drive safely when you leave.