Fit for Growth

Seize every opportunity for growth and

profitability by transforming operations
and investing in growth priorities

Fit for Growth is a registered service mark of PwC Strategy& LLC in the United States.
 Companies — regardless of their industry
or region — are fighting for growth

Fully 94 percent of executives say that growth is

a big priority and 85 percent say their companies’
target growth rates are in line with — or exceed —
their industries’ growth rates. But:

More than half, 51 percent, Only 39 percent are highly

believe their companies don’t confident their companies
clearly understand how to will realize these goals
realize these growth targets

1 Source: Strategy&, part of the PwC network, global survey of more than 500 executives in 2015
Very few companies are actually Companies’ readiness
for growth
primed and ready for it
Ready for Growth
firing on all cylinders

6% In the Game
strong strategic focus,
but lacking organizational
follow-through

Strategically Adrift
Only 6 percent of unclear strategy and critical
companies are well priorities that are not widely
positioned for sustainable understood

growth...the rest are

Capability Constrained
struggling to find strong strategies, but
their way needing more discipline
in execution

Distracted
some defined capabilities,
but not distinctive enough
to serve as a competitive
advantage

Source: strategy+business, “How Ready Are You for Growth?” Autumn 2013 2
 Instead, senior executives are plagued by
a variety of major problems…

83% 81% 78%

 81% 75% 66%

“Our strategy is not
well understood across
the organization.”
“The way management
allocates its time is
not driven by strategic
objectives.”
“The appraisal “Our company does not
process has no clear have the capabilities
consequences for required to win.”
managers who fail to
support the company’s
“Funding for critical “Low-priority
strategic objectives.”
initiatives gets initiatives get too
channeled in an ad hoc much funding.“
or informal manner.”

3 Source: Data based on results from the Strategy& Fit for Growth Index profiler.
…stemming from three root causes —
which reinforce one another:

Lack of Cost Lack of

strategic clarity misalignment organizational
support
No clear understanding Lack of investment
of how your company discipline that focuses Failure to align the
creates value for resources on the organization and its
customers and what your capabilities that culture to support your
core capabilities are really matter to your company’s strategy
company’s success

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 What’s the remedy?

Fit for Growth

Our unique service offering that helps you align your
strategy, costs, and organization

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Our Fit for Growth approach
helps you transform your
costs, to make you stronger
68% of CEOs globally planned to initiate a
cost-reduction initiative in 2016
Source: PwC, 2016 US CEO Survey
Cost cutting vs. strategic cost transformation
Wrong way
Treats costs separately
from strategy
Is driven by external pressure
Focuses on cost cutting
Shares the pain equally
Barely moves the needle
Follows industry
benchmarks blindly
Leads to costs creeping
back over time
Leaves you weaker
Right way
Treats spending as an investment
and allocates costs in service to
your company’s strategy
Is driven by an internal culture of
continuous improvement
Focuses on capability building and
performance improvement
Reinvests in a few priority growth
areas and cuts aggressively
elsewhere
Transforms the whole organization
Is tailored to the specific needs of
your organization
Creates a more sustainable
cost base
Makes you stronger
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 cost
transformation
Fit for Growth is a strategic approach to cost
transformation that connects choices about
cost management, capability development,
and organizational and cultural evolution
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The Fit for Growth approach works because
it helps you make deliberate, holistic choices
within the context of your company’s strategy

Fit for Growth framework

Company’s strategy
Clearly articulate the few capabilities that really matter to
your strategy and help you win in the market

Build Identify higher

value-added priorities Transform Reorganize
differentiating for investments cost structure Enable and sustain for growth
capabilities

Invest in a few differentiated Develop a clear cost agenda, Implement an organization model,
capabilities, funded by making deliberate choices with a processes and systems to unlock
improvements in the cost structure focus on process improvement potential and enable agility for growth

Enable change and cultural evolution

Create an environment and culture that embeds change in the company DNA and enables a sustainable future
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 This approach is based on our decades
of experience working with the world’s
leading companies across different
industries, regions, and market
conditions
“ If you don’t overcome yourself, you will
be overcome by others.”
Zhang Ruimin Chairman and CEO, Haier Group
For more information on how functional leaders can
take on a new strategic role, check out our white
9 paper “The New Functional Agenda.”
It has helped companies:
• Strengthen the few core capabilities that
set them apart from the competition
• Tailor solutions to their unique needs,
whether such operational improvements
are enterprise-wide or targeted to individual
business units or functional departments
• Avoid shortcomings of conventional
cost cutting or process/systems
transformation programs by looking
at costs objectively: stripping out non-
essential, “bad” costs, and reinvesting
in “good” costs that support the firm’s
core capabilities
• Make the changes stick by transforming
their organization model and company
culture from top to bottom — focusing
everyone on realistic, rational benchmarks
tied to what’s strategically important
 high

(Total Shareholder Return score)

Financial Performance
low

low high
Fit for Growth Index score
(measures the degree to which a company aligns its
resources, organization, and strategy)
Following a Fit for Growth approach has
been shown to pay off: companies with
higher Fit for Growth Index scores also
experience better financial performance Note: Dots represent companies from across the globe, across different industries,
for which we have assessed the degree to which they follow a Fit for Growth
approach and determined their two-year TSR (August 2010 to July 2012).
For more details, visit strategyand.pwc.com/ffgindexstudy
Source: Capital IQ database; Strategy& analysis Source: Capital IQ database; Strategy& analysis 10
 Case study
End-to-end Fit for Growth transformation
at a leading U.S. retailer
The “Before”
• Lack of solid strategy in the face of a difficult
competitive environment, depressed retail economy,
and saturated market
• Aggressive and persistent expansion through
acquisitions, new offerings, and store openings, even as
same-store revenue growth was slowing
• Labor costs and SG&A expenses rising faster than
revenue, threatening competitiveness in the marketplace
• Lack of organizational agility and internal understanding
of customer behavior, creating a disconnect between
store offerings and customer expectations
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The objectives
• Identify the areas in which the company needed
to excel, and those where table stakes would be
“good enough”
• Enhance offerings to be more customer-centric and
in line with customers’ increasing preference for
convenience
• Grow market share while reducing costs in a
sustainable way, saving necessary funding to invest in
projects to fuel future growth
• Move to a high-performance culture with less hierarchy
 “ Don’t be afraid to turn off the lights on
low-priority initiatives or investments
not aligned with your strategy.”
John Plansky Principal, PwC’s Strategy&
The transformation program
For more than a year, we worked side by side with
company executives, helping them increase the
productivity of their store labor, make field management
more efficient, redesign the headquarters organization,
and reduce non-merchandise procurement spend.
We also worked with the client team on developing a
powerful game plan for reinvestment.
The “After”
• Renewed focus and reinvestment in key customer-
related capabilities: customer intelligence, online
retailing, marketing, and merchandising
• Increased agility and better tailoring of offerings to
specific geographies
• US$1 billion in cost savings across all business areas;
40 percent increase in stock price within 18 months
• Enhanced company culture; staff are now better
educated, empowered, and encouraged to support
the company’s mission
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 How ready is your
company for growth?
Three key questions

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 “ Without a clear eyed view of strategy and the handful
of differential capabilities essential to successful
strategy execution, your company is a ship without
a rudder, and performance transformation initiatives
are destined for failure.”
1 Vinay Couto Principal, PwC’s Strategy&

Do you have a clear strategy, and

have you defined the capabilities
that are critical for your success?
Use your strategy and strengths as the foundation
for cost transformation

• Does your company have a business strategy that’s

clearly understood across the entire organization?

• Have you defined the few differentiating capabilities that

are critical to executing this strategy successfully?

• Are all major projects, initiatives, and budgets aligned to

strengthen these few capabilities?

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 Reinvesting to develop capabilities align your
resources
Cash released by an exemplary cost
transformation program
This initiative, conducted by a Fortune 500 company,
released more than US$1 billion dollars in gross
savings. About one-fourth of that money — a
remarkably large percentage, compared with most 2
cost initiatives — was reinvested to bolster and
expand the company’s distinctive capabilities.
Have you aligned your resources with
Management
and administration 9% Reinvestment
what drives your company’s success?
Technology 9% 25% Make rigorous trade-offs for where you invest — away
Sourcing 22% from what’s just “nice to have” and toward what truly
New drives your success.
investments 75%
in critical
capabilities • Do you invest enough to fuel your distinctive capabilities?
Operations 60%
• Has your company stopped spending on lower-value
initiatives and businesses not coherent with your strategy?
• Is your budgeting process well aligned with the
strategic planning process?

Gross savings Net savings

15 Source: Strategy&
 “If you want to maximize results, it’s not
enough to simply preach — you have to
set a good example.”
3
Ingvar Kamprad Founder, Ikea

3
Have you reorganized the firm to
support your mission, and does your
culture support the strategy?
Align your culture and decision making with your strategic
priorities — set the norms and expectations required for
success.

• Are managers empowered to act like owners of the business?

• Are important decisions made effectively and efficiently?
• Do you encourage people to continuously challenge
the status quo?

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 Case study

End-to-end Fit for Growth transformation

at a global consumer goods company

The “Before” The objectives

• Unclear strategy, the disadvantages of which were • Set up the organization to better compete with
exacerbated by new technology and competitors new market entrants as technologies evolved
disrupting the marketplace • Simplify brand and product families to better align
• High degree of complexity from multiple brands with customer segments
operating independently across multiple geographies, • Realize cost savings necessary to remain competitive
plus an extensive product portfolio and fragmented cus- in the marketplace
tomer base, which eroded revenue growth and led
to declining market share • Restructure the organization and its operational foot-
print to curb costs, allow faster decision making, and
• Series of recent acquisitions that had not been well offer enhanced customer support
integrated, creating a bloated cost structure, suboptimal
performance, and increasing margin pressure
• Slow decision making due to the firm’s size and
complexity; overlapping organizational layers creating
a lack of accountability and duplicative work
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 The transformation program
We worked with the client to implement a two-pronged
transformation plan: a radical cost savings program,
based on a less complex operating model for functional
support; and the reinvestment of a significant part of the
savings into growth drivers, such as growth markets,
customer- centricity, and innovation.
transformation
The “After”
• Enhanced strategy with clear imperatives, extensively
communicated throughout the organization
• Number of brands reduced by two-thirds and number
of product lines cut in half
• $50M cost reduction and $150M topline growth, with a
plan to sustain realized savings and identify cuts on an
ongoing basis
• Streamlined organization with simpler matrix structure
that is aligned with the company’s distinctive
capabilities and its strategy
• New set of cost performance indicators, along with
cost management tools and processes, that are
institutionalized across the organization
• Cost-conscious, productivity-fueled company mindset 18
 Resources
To help you get started on the
Fit for Growth journey

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Our five-minute Fit for Growth Index Profiler allows  

you to assess your firm’s readiness for growth, compare
your company against results from across your industry,
and visualize the payoff from managing cost in a more
strategic way: strategyand.pwc.com/ffgindexprofiler

Our team would be happy to set up a free, customized

Fit for Growth assessment for your company. Please
contact us at fitforgrowth@strategyand.pwc.com
for more information.

Additional tools, videos, and content can be found on the

Fit for Growth website: strategyand.pwc.com/fitforgrowth

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Additional Articles and Materials
Our engagements with the world’s top companies
have shown that the Fit for Growth approach
works. Our experience is supported by rigorous
quantitative and qualitative research: white papers,
studies, and research projects that have allowed
us to unearth what helps companies succeed and
grow. Here are some more materials that can help
you get on the right path.
  strategy-business.com/ccgs_book
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“Is Your Company Fit for Growth?”
Foundational article in strategy+business
that takes a look at how a more strategic
approach to costs can help you prepare for
the next round of expansion.
strategy-business.com/isyourcompanyffg
“How Ready Are You for Growth?”
Article in strategy+business that introduces the
Fit for Growth Index and shows that following
a Fit for Growth approach correlates with
superior company performance.
strategy-business.com/howreadyforgrowth
Cut Costs + Grow Stronger
E-book published as part of the Harvard
Business Press “Memo to the CEO” series
that provides executives with the tools they
need to rapidly implement capabilities-driven
cost reduction.
For more information, contact: fitforgrowth@strategyand.pwc.com

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Strategy& is a global team These are complex and charting your corporate We are part of the PwC
of practical strategists high-stakes undertakings strategy, transforming a network of firms in 157
committed to helping you — often game-changing function or business unit, or countries with more than
seize essential advantage. transformations. We bring building critical capabilities, 208,000 people committed
100 years of strategy we’ll help you create the to delivering quality in
We do that by working consulting experience value you’re looking for assurance, tax, and advisory
alongside you to solve your and the unrivaled industry with speed, confidence, services. Tell us what
toughest problems and and functional capabilities and impact. matters to you and find out
helping you capture your of the PwC network to the more by visiting us at
greatest opportunities. task. Whether you’re strategyand.pwc.com.

© 2015 PwC. All rights reserved. PwC refers to the PwC network and/or one or more of its member firms, each of which is a separate legal entity. Please see www.pwc.com/structure for further
details. Disclaimer: This content is for general information purposes only, and should not be used as a substitute for consultation with professional advisors.