Creating a New Market CFO Roundtable Woods Creek Consulting January 14, 2011 Kevin Klustner Managing Partner Convergency Partners

Creating New Markets Some Questions to Discuss Today: Do companies have to grow? What compels companies to grow? How do companies grow? What are the pitfalls of growth strategies and execution? Convergency Partners LLC

Creating New Markets: Defining the Three Horizons Horizon 1 Extended and defend core businesses Horizon 2 Build emerging businesses Horizon 3 Create viable options Time (years) Profit Convergency Partners LLC “The Alchemy of Growth” Baghai, Coley, White

Creating New Markets: Searching for New Opportunities 7 New Competitive Arenas 6 New industry structure 5 New geographies 4 New delivery approaches 3 New products and services 2 New customers 1 Existing products to existing customers Seven Degrees of Freedom for Growth Convergency Partners LLC “The Alchemy of Growth” Baghai, Coley, White

Creating New Markets: Seven Degrees of Freedom FocusStrategic Question?Some of Strategic Outcomes Real World Examples 1. Existing products to existing customers How could we increase sales to the same customers with the same product mix? Can we increase customer loyalty and share of each customers purchases? Could prices be adjusted to boost volume and net revenue? Amazon; free shipping for the year 2. New customersHow could we extend the business by selling existing products to new customers Could new approaches to advertising and promotion capture new customers in exiting segments? Are there new customer segments that might be interested in existing products Are there partnerships and alliances to increase reach of existing products? Google – everything it does is dedicated to driving eye- balls and ad revenue from new customers. Blackberry – enterprise to consumer 3. New products and services How could we grow by introducing new products and services? What new products or services could be developed to cater for emerging or latent demand? Are there any products or product lines that can be purchased or licensed to complement our current range? Apple – not just iPod, iPhone, iPad but think iTunes and iBooks Cisco Convergency Partners LLC

Creating New Markets: Seven Degrees of Freedom FocusCore Strategic IssueSome of Strategic Outcomes Real World Examples 4. New delivery approachesHow can we expand sales by developing better delivery systems for customers What new sales channels can we exploit? Is a direct channel now feasible? NetFlix streaming videos 5. New geographiesHow and where could we expand into new geographies? In which new markets could our business model be exploited? Could global coverage drive economies of scale? Caterpillar China Goldman Sachs 6. New industry structureHow much could we grow by changing the industry structure through acquisitions or alliances? Which troubled industry participants could be acquired at the right price? Which parts of the industry could be consolidated via acquisition? Oracle Procter & Gamble (Gillette) EMC (Isillon) 7. New competitive arenasWhat opportunities are there outside existing industry boundaries? Are there opportunities to integrate vertically? Do we have unique assets that could be used to create new businesses? Are other industries converging on our own? Western Union IBM Convergency Partners LLC

Creating New Markets: Talent Management By Horizon Horizon 1 Extended and defend core businesses Horizon 2 Build emerging businesses Horizon 3 Create viable options Operators Deep functional and /or industry expertise Strong drive to hit targets and meet plans consistently Discipline Create personal consequences for near term performance (positive and negative) Business Builders Entrepreneurial desire to create Comfort with ambiguity and change Top-line focused, sharp decision makers Provide autonomy, freedom to act Mandate to create and build Opportunity to create personal wealth Opportunity to build, create and leave legacy Visionaries Champions Unconventional thinkers Provide psychological rewards; Recognition of ideas; freedom to experiment Provide career advantages: intellectual curiosity Option to become Horizon 2 builder Provide financial rewards Type of People Talent Approach Convergency Partners LLC

Creating New Markets: Holistic Strategy and Execution Market Results Collective Leadership Strategy  Performance  Opportunity Operations Organization Culture Transformation Execution Convergency Partners LLC

Creating a New Market Thank You. Kevin Klustner Managing Partner Convergency Partners