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Excerpted from S&P 500 Organic Growth Efficiency Benchmarking: Leaders & Laggards
com 212‐785‐0281 2 . Anand Sanwal email@example.com 212‐785‐0205 Jonathan Sherry jsherry@brilliont.CONTACTING THE BRILLIONT TEAM Contact Us We welcome the opportunity to discuss any questions and ideas you have after you have reviewed this presentation.
Unfortunately though. The overall report analyzes the organic growth capabilities of all companies in the S&P 500. a company’s performance is largely driven by its Organic Growth Multiplier (OGM) – a measure of organic growth efficiency that accounts for both revenue and profit. public financials. This presentation discusses our OGM research. M&A transaction history and secondary market research. focusing on either revenue or profit.EXECUTIVE SUMMARY Organic Growth Multiplier: Measuring Your Company’s Organic Growth Efficiency Organic growth indicates management's ability to expand business using internal resources and hence is a key driver of corporate performance. OGM represents the amount of organic revenue and profit created per dollar of investment. Simply put. industry consultants and others can purchase the report directly from us. About the Research This presentation contains excerpts from our S&P 500 Organic Growth Efficiency Benchmarking: Leaders and Laggards report specifically for the S&P 500 Technology. organic growth discussions are typically one‐dimensional. • A modest improvement to Symantec's OGM could result in an estimated $167 million of incremental revenue and $118 million of incremental profit for the company over the next three years. and when maximized is an organization’s truest and best driver of shareholder returns. Non‐clients. Research Methodology Our research into organic growth efficiency examined the period from 2002‐2007 for the entire S&P 500 and was created using our proprietary OGM models coupled with research surveys. buy and sell‐side analysts. we analyzed all companies in the S&P 500 over the period 2002‐2007 to understand their individual Organic Growth Multipliers. its implications for corporate performance and the characteristics of OGM leaders as well as our findings as they relate to Symantec. In our research. In reality. Our summary findings and analysis of Symantec reveal the following: • Symantec‘s OGM is in the bottom quartile relative to the S&P 500 Technology. 3 . The full report for the S&P 500 Technology sector is available on a complimentary basis to select clients.
it is the best indicator of how well management uses its internal resources to expand revenues and profits. IT. sales. solely looking at organic revenue or profit growth misses the point. and capital projects is the driver of organic revenue and profit growth. initiatives and investments in marketing. Organic growth clearly identifies whether managers use their skills to improve the business and is a prerequisite for top‐tier performance over the long term. operations. Organizations that are efficient organic growth creators are those that deliver more organic revenue per dollar invested in strategic discretionary projects and investments. It doesn’t include growth derived from M&A or market‐driven growth and as a result. The efficient commitment of resources by management to discretionary projects.What is Organic Growth? What Drives Organic Growth? IT’S VITAL TO GET THE RIGHT TYPE OF ORGANIC GROWTH Organic growth represents the true growth for the core of the company. Instead. Our research and analysis finds that companies are rewarded by shareholders for this efficiency and outperform their competitive peers. What Matters Most in Driving Organic Growth? To maximize shareholder returns. it is the efficiency by which organic revenue and profit are created that is the best predictor of shareholder returns. innovation. 4 . advertising. R&D.
acquired growth. Lastly. The obvious implication of this is that a company’s ability to efficiently and profitably generate organic revenue is rewarded by shareholders. 5 High M&A Revenue as % of Revenue Growth TSR = 17% TSR = 13% TSR = 13% TSR = 36% Low Low Organic Growth Multiplier (OGM) High Notes: Average Annual S&P 500 Technology TSR over ‘02‐’07 was 23%. those with high OGMs who derived less of their total revenue from M&A activity also saw the best TSR performance.641 M&A deals evaluated within S&P500 Technology . greater OGM consistency led to even better returns as the figure above illustrates. The same relationship was evident for the entire S&P 500.S&P500 Technology ‐ Organic Revenue Efficiency is Rewarded Consistency of Organic Revenue Creation is also Prized S&P 500 TECHNOLOGY High TSR = 11% Total Shareholder Return TSR = 22% Standard Deviation of OGM Revenue growth = 13% Revenue growth = 34% 0% TSR = 9% TSR = 47% Revenue growth = 7% Revenue growth = 40% ‘02‐’07 Average Annual Organic Growth Multiplier Low Low Organic Growth Multiplier (OGM) High Note: Data presented for S&P 500 Technology A Focus on OGM vs. In essence. Furthermore. Growth from M&A Increases Shareholder Returns Commentary In the case of S&P 500 Technology. companies with consistently efficient resource allocation as manifested by high annual OGMs are rewarded with higher annual TSRs and revenue growth as well. This indicates a preference by shareholders for efficiently created organic growth which is less risky vs. a significant positive relationship between a company’s OGM and Total Shareholder Return (TSR) is apparent. 1. while a company’s average annual OGM over the period was positively correlated with greater TSR.
Revenue & Profit Implications of Improving OGM Incremental Revenue = $167 million Incremental Profit = $118 million $24 $17 Year 1 Year 2 Year 3 Organic Revenue Incremental Profit OGM 6 . we examined the impact to Symantec of an approximate 10% improvement in the company’s OGM which would be fully realized in three years. • $118 million of cumulative incremental profit over the next 3 years and $60 million of incremental profit per annum thereafter.Where Does Your Organization’s OGM Stack Up? S&P 500 Technology Organic Growth Multipliers (OGM) Commentary As we look specifically at Symantec’s average annual OGM for the period of this analysis. $85 $58 $41 $60 Conversely. Symantec could drive: • $167 million of cumulative incremental revenue over the next three years and $85 million of per annum revenue thereafter. S&P 500 TECHNOLOGY – SYMANTEC Symantec To understand this. respectively. This was done to be pragmatic as it assumes modest improvements to OGM year‐over‐year with the 10% improvement fully manifesting itself fully by year 3. we see the company’s OGM ranking puts it in the bottom quartile amongst its S&P 500 Technology peers. We’ve estimated that with a disciplined effort to improve the company’s OGM by 10%. what are the implications to performance if Symantec successfully improves and sustains higher OGM levels even modestly? It is also worth considering the implications of not improving the OGM. as well as the ongoing benefit of $85 and $60 million of incremental revenue and profit each year thereafter. not improving the OGM modestly as described above puts at risk the cumulative $167 and $118 million of incremental revenue and profit. As we look forward.
Responses to the twenty questions provide you with specific insights into how your organization allocates its discretionary resources for organic growth and the appropriateness of this allocation. 7 . accepted. please provide examples of how this was done both inter‐ and intra‐segment. (Please note the term “segments” refers to business units. please detail the information collected. Examples include: Has the organization analyzed and understood the ability of each organizational segment to deliver profitable efficient growth? If yes. are resources allocated so that segments with the best record of delivering efficient organic growth and who have the best opportunities for growth receive the most funding? If yes. product groups and/or geographic business lines. please illustrate how your resource allocation reflects this. please detail your company segments and your understanding of each in delivering profitable efficient growth. as well as how it relates to Symantec. funded and stopped in the last year? Are resources regularly moved within.) Based on this segment‐level analysis. we identified a list of twenty key questions for organizations to consider in order to understand and improve their organic growth capabilities. It allows you assess areas of strength and development and ultimately serves as the basis for a set of targeted measures that can be enacted to improve your organic growth efficiency. We welcome the opportunity to further discuss our research into organic growth and the investment optimization process.How Can Brilliont Help Improve Your Organic Growth Effectiveness? WHAT DO OGM LEADERS DO THAT OTHERS DON’T? Our research revealed that OGM leaders exhibit certain similarities that drive their success. Furthermore. we look forward to sharing insights. analyzed and tracked as well as its use to inform future decisions. experiences and case studies with you on other organizations who’ve taken steps to improve their organic growth efficiency. and more importantly. With this in mind. please detail what number of projects were reviewed. Is credible information collected. analyzed and tracked to gauge organic growth performance and inform future investment decisions? If yes. Is there a credible and empowered governance process that ensures proper go/kill decisions regarding organic growth projects and investments? If yes. across organizational segments to take advantage of the best organic growth opportunities? If yes.
ORGANIC GROWTH IN THE WORDS OF OTHERS 8 .
April 2008 9 . The Brilliont team is comprised of experts and practitioners who have managed and led significant organic growth enhancement efforts at S&P 500 companies. July 2008. June 2008 “The House of Rolling Heads”. Oct 2008 – American Strategic Management Institute. Dec 2008 – Pharmaceutical Portfolio Management Summit. S&P 500 Organic Growth Efficiency Benchmarking: Leaders and Laggards is the most exhaustive analysis of organizational organic growth efficacy ever done and has already been used by many organizations as a starting point to begin understanding how they can improve their organic growth generation capabilities.BRILLIONT BACKGROUND About Brilliont Brilliont is a boutique consulting and advisory firm helping clients create and deliver shareholder value through disciplined cost optimization. investment optimization and innovation. March 2008. by Anand Sanwal and Sandeep Arora “Budgeting: All Bad Things Must Come to an End”. Journal of Corporate Accounting and Finance. by Dominic Paniccia Optimizing Corporate Portfolio Management (book). by Anand Sanwal Select Recent & Upcoming Events Members of the Brilliont team have been or will be featured speakers at the following events: – World Bank Resource Forum. CFO Citigroup “OpEx as Investment: How to Spend More Strategically”. Business Finance Magazine. Fall 2008. Nov 2008 – BPM Summit. The firm’s groundbreaking report. BPM Magazine. June 2008 – Beyond Budgeting Roundtable. by Anand Sanwal with foreword by Gary Crittenden. Recent & Upcoming Publications “S&P 500 Organic Growth Efficiency Benchmarking: Leaders and Laggards”.
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