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Our latest perspective - What's behind under-performing listed companies?

Outperform through the downturn

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Global Advisors is a leader in defining quantified strategies, decreasing uncertainty, improving decisions and achieving measureable results.

We specialise in providing highly-analytical data-driven recommendations in the face of significant uncertainty.

We utilise advanced predictive analytics to build robust strategies and enable our clients to make calculated decisions.

We support implementation of adaptive capability and capacity.

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Global Advisors’ Thoughts: Outperforming through the downturn AND the cost of ignoring full potential

Global Advisors’ Thoughts: Outperforming through the downturn AND the cost of ignoring full potential

Press drew attention last year to a slew of JSE-listed companies whose share prices had collapsed over the past few years. Some were previous investor darlings. Analysis pointed to a toxic combination of decreasing earnings growth and increased leverage. While this might be a warning to investors of a company in trouble, what fundamentals drive this combination?

In our analysis, company expansion driven by the need to compensate for poor performance in their core business is a typical driver of exactly this outcome.

This article was written in January 2020 but publication was delayed due to the outbreak of Covid-19. Five months after South Africa’s first case, we update our analysis and show that core-based companies outperformed diverse peers by 29% over the period.

Management should always seek to reach full potential in their core business. Attempts to expand should be to a clearly logical set of adjacencies to which they can apply their capabilities using a repeatable business model.

In the article “Steinhoff, Tongaat, Omnia… Here’s the dead giveaway that you should have avoided these companies, says an asset manager,” (Business Insider SA, Jun 11, 2019) Helena Wasserman lists a number of Johannesburg Stock Exchange (JSE) listed shares that have plummeted in recent years.

In many cases these companies’ corresponding sectors have been declining. However, in most of the sectors there is at least one company that has outperformed the rest. What is it about these outperformers that distinguishes them from the rest?

The outperformers have typically shown strong financial performance – be that Growth, ROE, ROA, RONA or Asset Turnover – and varying degrees of leverage. However, performance against these metrics is by no means consistent – see our analysis.

What is consistent is that the outperformers all show clearly delineated core businesses and ongoing growth towards full potential in these businesses alongside growth into clear adjacencies that protect, enhance and leverage the core. In some cases, the core may have been or is currently being redefined, typically through gradual, step-wise extension along logical adjacencies. Redefinition is particularly important in light of the digital transformation seen in many industries. The outperformers are very seldom diversified across unrelated business segments – although isolated examples such as Bidvest clearly exist in other sectors.

Analysis of the over- and underperformers in the sectors highlighted in the article shows that those following a clear core-based strategy have typically outperformed peers through the initial months of the downturn caused by the Covid-19 outbreak.

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Strategy Tools

PODCAST: Effective Transfer Pricing

PODCAST: Effective Transfer Pricing

Our Spotify podcast discusses how to get transfer pricing right.

We discuss effective transfer pricing within organizations, highlighting the prevalent challenges and proposing solutions. The core issue is that poorly implemented internal pricing leads to suboptimal economic decisions, resource allocation problems, and interdepartmental conflict. The hosts advocate for market-based pricing over cost recovery, emphasizing the importance of clear price signals for efficient resource allocation and accurate decision-making. They stress the need for service level agreements, fair cost allocation, and a comprehensive process to manage the political and emotional aspects of internal pricing, ultimately aiming for improved organizational performance and profitability. The podcast includes case studies illustrating successful implementations and the authors’ expertise in this field.

Read more from the original article.

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Fast Facts

Fast Fact: Great returns aren’t enough

Fast Fact: Great returns aren’t enough

Key insights

It’s not enough to just have great returns – top-line growth is just as critical.

In fact, S&P 500 investors rewarded high-growth companies more than high-ROIC companies over the past decade.

While the distinction was less clear on the JSE, what is clear is that getting a balance of growth and returns is critical.

Strong and consistent ROIC or RONA performers provide investors with a steady flow of discounted cash flows – without growth effectively a fixed-income instrument.

Improvements in ROIC through margin improvements, efficiencies and working-capital optimisation provide point-in-time uplifts to share price.

Top-line growth presents a compounding mechanism – ROIC (and improvements) are compounded each year leading to on-going increases in share price.

However, without acceptable levels of ROIC, the benefits of compounding will be subdued and share price appreciation will be depressed – and when ROIC is below WACC value will be destroyed.

Maintaining high levels of growth is not as sustainable as maintaining high levels of ROIC – while both typically decline as industries mature, growth is usually more affected.

Getting the right balance between ROIC and growth is critical to optimising shareholder value.

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Selected News

Quote: Jamie Dimon – JP Morgan Chase CEO

Quote: Jamie Dimon – JP Morgan Chase CEO

“We have about $2 billion of [AI] benefit. Some we can detail…we reduced headcount, we saved time and money. But there is some you can’t; it’s just improved service and it’s almost worthless to ask what’s the NPV. But we know about $2 billion of actual cost savings. And I think it’s the tip of the iceberg. ” – Jamie Dimon, CEO JP Morgan

Jamie Dimon’s assertion that JPMorgan Chase has achieved “$2 billion of [AI] benefit” represents a landmark moment in corporate artificial intelligence adoption, delivered by one of the most influential figures in global banking. This statement, made during a Bloomberg interview in London on 7th October 2025, encapsulates both the tangible returns from strategic AI investment and the broader transformation reshaping the financial services industry.

The Executive Behind the Innovation

Jamie Dimon stands as arguably the most prominent banking executive of his generation, having led JPMorgan Chase through nearly two decades of unprecedented growth and technological transformation. Born in 1956, Dimon’s career trajectory reads like a masterclass in financial leadership, beginning with his early mentorship under Sandy Weill at American Express in 1982. His formative years were spent navigating the complex world of financial consolidation, serving as Chief Financial Officer and later President at Commercial Credit, before ascending through the ranks at Travelers Group and briefly serving as President of Citigroup in 1998.

The defining moment of Dimon’s career came in 2000 when he assumed leadership of the struggling Bank One, transforming it into a profitable institution that would merge with JPMorgan Chase in 2004. His appointment as CEO of JPMorgan Chase in 2006 marked the beginning of an era that would see the firm become America’s largest bank by assets, with over $4 trillion under management. Under his stewardship, JPMorgan emerged from the 2008 financial crisis stronger than its competitors, earning Dimon recognition as one of Time magazine’s most influential people on multiple occasions.

Dimon’s leadership philosophy centres on long-term value creation rather than short-term earnings management, a principle clearly evident in JPMorgan’s substantial AI investments. His educational foundation—a bachelor’s degree from Tufts University and an MBA from Harvard Business School—provided the analytical framework that has guided his strategic decision-making throughout his career.

The Strategic Context of AI Investment

JPMorgan’s artificial intelligence journey, as Dimon revealed in his October 2025 interview, began in 2012—long before the current generative AI boom captured public attention. This early start positioned the bank advantageously when large language models and generative AI tools became commercially viable. The institution now employs 2,000 people dedicated to AI initiatives, with an annual investment of $2 billion, demonstrating the scale and seriousness of their commitment to technological transformation.

The $2 billion in benefits Dimon describes represents a rare quantification of AI’s return on investment at enterprise scale. His candid acknowledgment that “some we can detail… we reduced headcount, we saved time and money. But there is some you can’t; it’s just improved service and it’s almost worthless to ask what’s the NPV” reflects the dual nature of AI value creation—measurable efficiency gains alongside intangible service improvements that ultimately drive customer satisfaction and competitive advantage.

The deployment spans multiple business functions including risk management, fraud detection, marketing, customer service, and idea generation. Particularly striking is Dimon’s revelation that 150,000 employees weekly utilise internal AI tools for research, report summarisation, and contract analysis—indicating systematic integration rather than isolated pilot programmes.

The Broader AI Investment Landscape

Dimon’s comments on the broader AI infrastructure spending—the trillion-dollar investments in chips, cloud computing, and AI model development—reveal his seasoned perspective on technological transformation cycles. Drawing parallels to the Internet bubble, he noted that whilst many companies worth billions ultimately failed, the infrastructure investments enabled the emergence of Facebook, YouTube, and Google. This historical context suggests that current AI spending, despite its magnitude, follows established patterns of technological disruption where substantial capital deployment precedes widespread value creation.

His observation that “there will be some real big companies, real big success. It will work in spite of the fact that not everyone invested is going to have a great investment return” provides a pragmatic assessment of the AI investment frenzy. This perspective, informed by decades of witnessing technological cycles, lends credibility to his optimistic view that AI benefits represent merely “the tip of the iceberg.”

Leading Theorists and Foundational Concepts

The theoretical foundations underlying JPMorgan’s AI strategy and Dimon’s perspective draw from several key areas of economic and technological theory that have shaped our understanding of innovation adoption and value creation.

Clayton Christensen’s theory of disruptive innovation provides crucial context for understanding JPMorgan’s AI strategy. Christensen’s framework distinguishes between sustaining innovations that improve existing products and disruptive innovations that create new market categories. JPMorgan’s approach appears to embrace both dimensions—using AI to enhance traditional banking services whilst simultaneously creating new capabilities that could redefine financial services delivery.

Joseph Schumpeter’s concept of “creative destruction” offers another lens through which to view Dimon’s frank acknowledgment that AI “is going to affect jobs.” Schumpeter argued that technological progress inherently involves the destruction of old economic structures to create new ones. Dimon’s emphasis on retraining and redeploying employees reflects an understanding of this dynamic, positioning JPMorgan to capture the benefits of technological advancement whilst managing its disruptive effects on employment.

Michael Porter’s competitive strategy theory illuminates the strategic logic behind JPMorgan’s substantial AI investments. Porter’s work on competitive advantage suggests that sustainable competitive positions arise from activities that are difficult for competitors to replicate. By building internal AI capabilities over more than a decade, JPMorgan has potentially created what Porter would term a “activity system”—a network of interconnected organisational capabilities that collectively provide competitive advantage.

Erik Brynjolfsson and Andrew McAfee’s research on digital transformation and productivity paradoxes provides additional theoretical grounding. Their work suggests that the full benefits of technological investments often emerge with significant time lags, as organisations learn to reorganise work processes around new capabilities. Dimon’s observation that parts of AI value creation are “almost worthless to ask what’s the NPV” aligns with their findings that transformational technologies create value through complex, interconnected improvements that resist simple measurement.

Geoffrey Moore’s “Crossing the Chasm” framework offers insights into JPMorgan’s AI adoption strategy. Moore’s model describes how technological innovations move from early adopters to mainstream markets. JPMorgan’s systematic deployment across business units and its achievement of 150,000 weekly users suggests successful navigation of this transition—moving AI from experimental technology to operational infrastructure.

Paul David’s work on path dependence and technological lock-in provides context for understanding the strategic importance of JPMorgan’s early AI investments. David’s research suggests that early advantages in technological adoption can become self-reinforcing, creating competitive positions that persist over time. JPMorgan’s 2012 start in AI development may have created such path-dependent advantages.

Brian Arthur’s theories of increasing returns and network effects add further depth to understanding JPMorgan’s AI strategy. Arthur’s work suggests that technologies exhibiting increasing returns—where value grows with adoption—can create winner-take-all dynamics. The network effects within JPMorgan’s AI systems, where each application and user potentially increases system value, align with Arthur’s theoretical framework.

Economic and Strategic Implications

Dimon’s AI commentary occurs within a broader economic context characterised by elevated asset prices, low credit spreads, and continued consumer strength, as he noted in the Bloomberg interview. His cautious optimism about economic conditions, combined with his bullish view on AI benefits, suggests a nuanced understanding of how technological investment can provide competitive insulation during economic uncertainty.

The timing of Dimon’s remarks—amid ongoing debates about AI regulation, job displacement, and technological sovereignty—positions JPMorgan as a thought leader in practical AI implementation. His emphasis on “rules and regulations” around data usage and deployment safety reflects awareness of the regulatory environment that will shape AI adoption across financial services.

His comparison of current AI spending to historical technology booms provides valuable perspective on the sustainability of current investment levels. The acknowledgment that “not everyone invested is going to have a great investment return” whilst maintaining optimism about overall technological progress reflects the sophisticated risk assessment capabilities that have characterised Dimon’s leadership approach.

The broader implications of JPMorgan’s AI success extend beyond individual firm performance to questions of competitive dynamics within financial services, the future of employment in knowledge work, and the role of large institutions in technological advancement. Dimon’s frank discussion of job displacement, combined with JPMorgan’s commitment to retraining, offers a model for how large organisations might navigate the social implications of technological transformation.

The quote thus represents not merely a financial milestone but a crystallisation of strategic thinking about artificial intelligence’s role in institutional transformation—delivered by an executive whose career has been defined by successfully navigating technological and economic disruption whilst building enduring competitive advantage.

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