Strategic Sourcing & Supply Chain Improvements
Acquisition Strategy, Targeting, Financing & Integration
Intellectual Property Licensing & Strategic Alliances
Marketing & Sales Best Practices
Value Driver Analysis for Business Profitability Improvement
 

Strategic Sourcing & Supply Chain Improvements

Many larger manufacturing businesses have been under increased pricing pressure from their customers in recent years. This has required them to re-examine the competitiveness of their purchasing and supply base. The current conditions take root in the leveraged buyout and re-engineering days of the late 1980s and early 1990s. That was a difficult time for many procurement organizations, which were parts of larger public companies or leveraged companies. In such companies, the focus on getting close to the customer, short-term financial results, and overhead reduction resulted in a de-emphasis on and even a gutting of procurement departments in a misguided effort to be "lean and mean." One forlorn procurement manager once put it, "We went way beyond 'lean and mean,' all we got was skinny and teed off!" As companies saved money on the reduced cost of the purchasing department, it became more difficult to effectively manage the cost of purchases themselves, which can be up to 80% of the entire cost base of the business.

Still reeling from these initiatives, understaffed and overworked purchasing organizations picked up on a new buzzword in the 1990s-"partnering." The promise was to identify a few strategic suppliers, get close to them, commit to long-term relationships, and your business performance will skyrocket. Often, they maintained their long-standing relationships incumbent suppliers, which were frequently family-owned, middle market companies.

By the late 1990s, global competitors from Mexico, China, India, and Eastern Europe put enormous pressure on U.S. and Western European businesses. The suppliers from these regions are very competitive. Often they can deliver comparable quality at 30% to 50% lower-cost. This has required many purchasing organizations to revisit their "partnerships." The margins of many medium-sized companies have been squeezed in the process. But lack of information, trust, and the prospect of extended supply lines has prevented many companies from fully exploiting this historic global business opportunity, which means that pricing pressure may increase going forward.

Many companies today must focus on seeking additional purchasing improvements. Recent experience shows that companies who apply best practice procurement processes, e-sourcing technologies, and global sourcing strategies are consistently saving 15% to over 50% on purchases of both production materials and indirect purchases. Moreover, these results can have even more impact when purchasing focuses its efforts in the product design phase where new products can now be launched at dramatically lower cost. This can generate increased market share and earlier breakeven on products thereby making procurement a driver of company growth. Source's growth advisory team has considerable experience in working with clients on both the buy and sell sides of supply chain issues.
 

Acquisition Strategy, Targeting, Financing & Integration

A study, completed by the Association for Corporate Growth several years ago, confirmed that business acquisitions (i.e. external growth) are one of the three principal growth drivers for the majority of companies with revenue above $100MM. However, supporting an effective external growth plan can be burdensome for smaller subsidiaries or divisions of larger public companies. Pursuing acquisitions can be distracting to current management team members who need to focus on current operations. Adding new staff to pursue acquisitions can increase fixed overhead, thereby reducing earnings per share, and also place burdensome time and resource demands on subsidiaries. Often the acquisition requirements of smaller subsidiaries can be a distraction to the more important business development goals of the parent company. Finally, there are many other competitors and well-capitalized buyout funds that are also aggressively seeking acquisitions; frequently bidding-up prices in the process. While buy-side acquisition initiatives are never guaranteed to produce results, Source can efficiently provide outsourced business development services for subsidiaries of larger public companies that: (i) minimize fixed cost, resource drain and distraction while (ii) positioning the business to be a prepared acquirer. Our skilled senior professional staff members, databases that facilitate acquisition targeting, and years of transaction experience can provide cost effective acquisition guidance. For more information on how Source's acquisition services can efficiently support your business development objectives click here.
 

Intellectual Property Licensing & Strategic Alliances

Intellectual property is a key ingredient for value creation in most businesses. Intellectual property helps distinguish a company from its competitors. Many larger public companies have not integrated the concept of third-party intellectual property licensing into the growth strategy for their smaller subsidiaries. Instead many of their subsidiaries are focused solely on internal research and development, or engineering or testing. This can lead to higher cost or lengthier development times. It is also often difficult for smaller subsidiaries to support the business development efforts that would be required to seek external intellectual property. Therefore, many smaller subsidiaries of public companies are limited in their approach to intellectual property. Source has perfected an approach to cost efficiently evaluate whether intellectual property might be available for licensing from other Fortune 1000 companies. Such companies are often eager to find other businesses that can commercialize their intellectual property for various purposes. For more information on how Source can help integrate the concept of intellectual property licensing into your Growth Strategy click here.
 

Marketing & Sales Best Practices

Many smaller divisions or subsidiaries of larger public companies include both internal and external growth objectives in their strategic plans. Internal, also referred to as organic, growth is typically the least capital intense route to increasing the size and value of a business. It is also less risky than acquisitions. However, when you isolate the financial performance of many smaller divisions or subsidiaries, their internal or "organic" growth is often anemic. Only those companies that are performing the marketing and sales functions at a "best practice" level of performance can demonstrate solid results in the area of internal growth. Internal growth is also typically the most capital efficient and poses far less financial risk for shareholders than does acquisitions. However, due to weak internal growth, many divisions or subsidiary managers will rush towards external growth options, which are typically acquisitions, not realizing that their internal sales results could be dramatically improved. After all, it is estimated that roughly 55% of all completed acquisitions fail to provide anticipated financial results. Therefore, an increasing number of senior executives are examining their smaller divisions or subsidiaries to determine where improvements can be realized through embracing marketing and sales best practices.

The objective of marketing is to identify a qualified lead or opportunity. There are a number of processes used to do so. Some of the most familiar include:

• Advertising (TV, radio, billboards, magazines, etc.)
• Trade shows
• Referral management
• Internet search optimization
• Branding activities

The objective of sales is to pursue and close the sale, given a lead/opportunity by marketing. Salespeople are most effective when the following factors are optimized:

1. Knowledge: The salespeople know their products and services so well they can act as a true business consultant helping prospects solve real business problems.
2. Aptitude: The salespeople have a talent for sales that is in the DNA. This talent can be easily ascertained by testing.
3. Skills: The salespeople have mastered the Top Ten Skills of the Super Salespeople. These skills are not in the DNA, they must be learned.
4. Motivation: The salespeople are motivated to sell. Motivation can be partially ascertained with testing, but must be verified in interviews.
5. Process: The salespeople are working in companies that have best practice marketing processes to support them.

Source people can offer the following assistance in helping our client's businesses transition to marketing and sales best practices with the following four offerings:

• Step One: Conduct an assessment of the sales and marketing processes and provide recommendations on transitioning to "best practice."
• Step Two: Assess the aptitude and motivation of all current and future salespeople.
• Step Three: Train salespeople on the top ten skills used by the country's very best salespeople.
• Step Four: Conduct and facilitate a Strategic Marketing Planning offsite for company executives and salespeople. The output of the offsite is a roadmap for growing the company.

Value Driver Analysis for Business Profitability Improvement

The financial results reported by companies have been likened to the score on the board during a football game. They indicate whether you are winning or losing. However, the score does not necessarily provide insight into the state of play on the field. Similarly, analyzing the performance of a company based solely upon a review of its financial results does not provide the critical insight needed to gauge a company's value driver strengths or weaknesses. The key Value Drivers in a business are Marketing, People, Process and Information. Strengths or weaknesses in each of these critical areas ultimately will affect the financial results of a company. Is it possible to evaluate the Value Driver Strength of an organization to determine in advance how strong or weak its financial results might be? And, in fact, to enable the owners to improve the performance of a company before poor financial results are reported? From years of working with medium sized businesses, Source has been able to examine the Value Driver performance of hundreds of companies and, by doing so, has developed a proprietary Value Driver Survey that can be used by clients to materially improve the future profitability and financial results of a medium-sized company. The Value Driver Survey will: (i) identify the value drivers that can have the most immediate impact on improving the value and profitability of your subsidiaries, (ii) isolate the discrepancies among internal views held by directors or key managers, which might be hindering the effective implementation of business plans or otherwise causing progress to lag, and (iii) provide a highly accurate analysis of a company's Value Driver ranking relative to other companies. For additional information on our proprietary Value Driver Survey, please click here.