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Global Advisors’ Thoughts: Business success. Get real.
By Marc Wilson
We all want success. And as we embark on a career, most of us want to be successful. But when I probe aspirations, “being successful” is usually a proxy for “I want the rewards / power /status of success.”
If you think that business success has different rules to success in sports, less reliance on discipline, more reliance on connections and things out of your control, reconsider or stop reading.
If your job is a ticket to a pay-cheque, is so-many-hours-per-day, stop reading.
Brutally, most of us will not be successful. We will not achieve stand-out performance. We will under-achieve our childish dreams. Choose:
- Continue to fantasize OR
- Get real and set your targets lower OR
- Confront the challenge and do what it takes to chase your dream.
Dreaming is important. It is the often the reason that we try at all. But the great achievers realise that a dream without a plan and action remains a fantasy.
“…in the words of Scripture, the time has come to set aside childish things.” — U.S. President Barack Obama
Obama was quoting “When I was a child, I spake as a child, I understood as a child, I thought as a child: but when I became a man, I put away childish things.”
When I was younger and starting out, I think I marked a lot of my desires for success in positions or promotions I hoped to achieve. In the first draft of this article, someone remarked that I had not mentioned promotion once. That is quite a stunning reflection. I believe my experience and growing up helped me realise that promotion and position reflect a result of success rather than success in itself.
Many of us do fantasize. As adolescents, we dream of mansions and sports cars, of power and glory, of beautiful spouses and successful children. As we begin our career journey, these dreams inevitably meet reality. We may continue to deny reasons for the gap between dreams and reality, but many reach a realisation at some point that not everybody can be excellent – by definition. And that to be excellent, we need to be doing things better than those in our defined benchmark.
We fantasize for good reason. Life is hard. As we become more experienced, we discover that achieving success typically requires far more from us than we imagined, we are not all exceptional, success is often dependent on the support of others – and people and relationships are not predictable. Life throws curve balls – illness, family needs and financial constraints to name a few.
But if we are to undertake an adult approach to success, it becomes time to replace fantasy with a deliberate approach to achieving our dreams.
What is success? At its simplest, success is achieving a goal. Being successful is therefore achieving goals regularly. But to most of us, being successful is more than this. Being successful in many people’s minds equates to excellence. Excellence – exceeding standard performance, standing-out, being the best. And pointedly, the rewards most desire for being successful equate with those for excellence.
This is an important distinction. The definition of excellence seems to be far more closely aligned with the aspirations of those with the desire to be successful. The measures of excellence are far more objective and demanding than those of success.
We tend to apply different rules to business success. It must be balanced. It must be within its 9-to-5 box. Here is my challenge to you: if you desire super-achiever business status, why would the lessons learnt from Olympian sports success be different to achieving Olympian stand-out performance in business?
Olympic sports success is not balanced. It is not confined to a part of the day. Olympian sports success is obsessive. It is unbalanced. It is single-minded. It requires brutal sacrifice and pain (see the graphic to the left showing the cost and effort required to get into the Olympics – source: Voucherbox). Why would being the best in your business field require anything less?
I think we tend to create an artificial distinction because an Olympic goal might be confined to a target by the age of 30. Thereafter an athlete can retire to a “normal” life. Similarly, an overachieving student might single-mindedly pursue “top-of the-class” performance knowing that the pain and sacrifice will end with the award of a degree. A business career is part of most of our adult lives and sacrifice for that amount of time is untenable for most people. For this reason, careers like investment banking and management consulting tend to have short lifespans before achievers move on to a second phase. I believe that for this reason they tend to attract more employees seeking super-achievement before the “second-phase” – people will accept the discomfort for a short time horizon.
I believe that there are fifteen determinants to achieving business-career excellence.
1. Get real – look outwards
It is impossible for everybody to…. To read more click here.
Strategy Tools
Strategy Tools: Opportunity/vulnerability matrix – “The Bananagram”
Logic suggests that high relative market share (RMS) should translate into higher profitability (unless the firm was not using its potential advantages or pricing to penetrate the market further). This suggests that a “normative curve / band” exists to describe this phenomenon i.e. the expected profitability of the average business segment in a particular industry according to normal expectations conditional on the segment’s relative market share. This normative band is shown in the figure below as the area between the two curves.
The Opportunity / Vulnerability Matrix
The curve is best explained using data / businesses that have been correctly segmented. In practice such data can only be obtained after analysing the organisation and having a good understanding of any relationships. The band used to be shown coloured yellow, hence the chart became known as a “bananagram”.
The implication of the curve is that high relative market share positions, correctly segmented, are valuable segments / businesses. Managers should therefore strive to achieve / participate in these segments / businesses.
Another implication, in some ways obscured focusing primarily on the growth share matrix (especially where “dogs” are concerned), is that it is useful to improve relative market share in a business segment whatever the starting position. The bananagram enables one to calculate a rough estimate of the equilibrium profitability to be expected from any particular position (relative market share). Therefore it is possible to estimate the potential benefit of moving any particular segment position against the cost of doing so – extra marketing spend, product development or lower prices. This allows one to quantitatively assess whether it is worth trying to raise RMS and which segment / business investments give the best return to shareholders.
Empirical evidence suggests that the majority of observations would fall between the two curved lines and it would be unusual for businesses to fall outside this band. There are two possible positions where a business segment can find itself outside of the two curved lines – this is depicted in the figure below.
The Opportunity / Vulnerability Matrix – Example
Business A is earning (for example) 45 per cent return on net capital employed, a good return, but is in a weak relative market share position (say 0,5x, or only half the size of the segment leader). The theory and empirical data from the matrix suggests that the combination of these two positions is at best anomalous, and probably unsustainable. Business A is therefore in the “vulnerability” part of the matrix. The expectation must be that in the medium term, either the business must improve its relative market share position to sustain its profitability (the dotted arrow moving left), or that it will decline in profitability (to about break-even). Why should this happen? Well, the banana indicates that the market leader in this business may well be earning 40 percent or even more ROCE in the segment. What may be happening is that the leader is holding a price umbrella over the market, that is, is pricing unsustainably high, so that even the competitors with weak market share are protected from normal competition (especially where pricing is concerned). What happens if the market leader suddenly cuts prices by 20 percent? They will still earn a good return, but the weaker competitors will not. The leader may opt to provide extra product benefits or services, instead of lowering prices, but the effect would still be a margin cut. It is as well to know that business A is vulnerable. If relative market share cannot be improved, it is sensible to sell it before the profitability declines.
Now let’s look at business B. This is a business in a strong relative market share position – the leader in its segment, five times larger than its nearest rival. It is earning 2 percent ROCE. This is a wonderful business to find. The theory and practical data suggest that such a business should be making 40 percent ROCE, not 2 percent. Nine times out of ten when such businesses are found, it is possible to make them very much more profitable, usually by radical cost reduction (often involving restructure), but sometimes through radical improvement of service and product offering to the customer at a low extra cost to the supplier, but enabling a large price hike to be made. Managements of particular businesses very often become complacent with historical returns and think it is impossible to raise profits in a step function to three, four or five times their current level. The bananagram challenges that thinking for leadership segment positions, and usually the bananagram is proved right. After all, high relative market share implies huge potential advantages; but these must be earned and exploited, as they do not automatically disgorge huge profits.
Source: Koch, R – “Financial Times Guides Strategy” – Fourth edition – Prentice Hall – page 313-316
Fast Facts
Going niche is not always a viable strategy for South African manufacturers
- Niche food markets are relatively small in South Africa when craft beer, pure-ground coffee, Fairtrade coffee and organic foods are used as proxies.
- According to Global Advisors analysis, niche products account for between 0,38% and 19,60% of total market volumes and have a potential consumer size of just over 900 000 adults if Gauteng, Kwazulu-Natal and the Western Cape are targeted.
- Companies within the niche market space must therefore carefully consider the size of their particular niche market, in terms of the potential volumes that they should produce, the number of potential consumers, in terms of the targeted LSM group, and where these consumers are located.
- For companies already producing mass market products, niche products might require a different business model and could become a distraction to their core product offerings.
- The size of these niche sectors are expected to increase in South Africa in the near future due to the rise of the middle-class.
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Quote: Paul J Meyer
“Communication – the human connection – is the key to personal and career success.” – Paul J. Meyer
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