Leadership Day Growth & Business Development Panel

Governing and Growing Companies in Minnesota

Leadership Day Growth & Business Development Panel May 20, 2014

Introduction JOANNE KUDRNA

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Agenda & Introductions Panel Facilitator: Joanne Kudrna, Sr. Consultant, Granite Equity Partners

•  Bob White, Board Chair Microbiologics & Vector; Director GeoComm; Vice Chair Granite Equity LLC

•  Greg Schumacher, Partner, Granite Equity Partners •  Mark Coronna, Managing Director, Marks and Crown •  Rick Claar, Partner, The Martec Group •  Bill Hoffman, Managing Partner & Co-Founder, Frontline Insights •  Keith Olson, Investment Manager, Granite Equity Partners •  John Bryant, CEO, GeoComm

People

Process Information

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Overview

Customer Intimacy

• How do we get the Right People in the Right Places?

- Greg Schumacher

• What are the Opportunities & Challenges for our Organizations?

- Bob White

• How do we get useful Market Intelligence?

- Rick Claar

• How do we Engage Employees for Internal

Intelligence? - Bill Hoffman

• What Processes and Frameworks can Guide our Work? - Mark Coronna

• What Resources do we have for Acquisitive Growth?

- Keith Olson

• What has GeoComm learned in its Business Development journey?

- John Bryant

What are the Opportunities & Challenges for our Organizations?

BOB WHITE

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¡ Building growth into your business plan

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Sustainable Growth

Creating Value and Strengthening Sustainability

¡ Intimacy ! Creates IDEATION ! Creates INNOVATION ! Creates a BUSINESS ENTITY ! Creates an ORGANIZATION

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Business Creation

¡ Creates a need for: ! People ! Processes ! Information

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Organization

People

Process Information

Customer Intimacy

¡ Business maturity leads towards flat to modest growth ¡ Require reinvention / innovation ¡ Require different: ! Information ! Process ! Skills / Competencies

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The Challenge

How do we get the Right People and Organize for Growth?

GREG SCHUMACHER

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•  Helping create sustainable growth and value creation •  Proactively managing the business development process to drive 2-5 year

revenues and profits •  Defining opportunities which build on the company’s value proposition

The Business Development Leader is responsible for:

•  Participates in the development of the Strategic Plan •  Develops plans to achieve growth and profitability through new products and

services, new markets, new relationships, and new business opportunities as well as via acquisitions, mergers, partnerships, joint ventures, and/or divestitures

•  Implements and manages a defined business development process encompassing innovation, product and service definition, construction and launch, and ongoing portfolio management stages

•  Works cross functionally to understand resource requirements, to complete financial analyses, and to define, construct, and launch new products and services, new programs, new relationships

Primary Responsibilities:

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Business Development Leader – Role Summary

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Desired Behavioral Competencies

Intellectual

Interpersonal

Motivation

• Handles Ambiguity • Analytical • Strategic Thinker • Conceptual • Information Seeker • Intuitive • Perceptive

• Collaborative • Persuasive • Risk-taker

• Continuous Learner • Customer-oriented • Entrepreneurial/Intrapreneurial • Initiative • Persistent • Resourceful • Wants a Challenge

Representative Skills

•  Leadership skills •  Influencing skills •  Change

management skills •  Project planning/

project management skills

•  Problem solving skills

•  Market analysis skills

•  Financial skills

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Business Development Qualifications

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Identify, Assess, and Recruit Business Developers

Structured Interviews

•  Design process and interview questions to assess competencies/skills

•  Interview team assignments focused on fit to role •  360° Reviews for Internal Candidates/References for

External Candidates

Assessments •  Career Interests and Aspirations •  Personality Profiles •  Cognitive Ability Assessments

Recruiting

•  Track record relevant to company situation (industry, stage, structure, etc.) with experience building/expanding businesses

•  Candidates may have experience in Business Development, Marketing, Product Management, Corporate Development/Strategy, or Sales Management

Organizing

•  Leader typically reports to President and CEO •  No one “best” way to do it…adapt your structure to fit

to the strategic objectives •  Assess your innovation environment and challenges

to determine optimal structure

Developing •  Resources, tools, templates •  Business Development Site on Granite Exchange

Enabling

•  Processes and practices that encourage interaction and facilitate collaboration across functions

•  Technology and systems •  Foster a culture that allows for imaginative

thinking, prudent risk taking and the ability to seek out, create and introduce innovative solutions

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Organize, Develop, and Enable Business Developers

What Processes & Frameworks can guide our work? MARK CORONNA

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Firms must develop multiple business opportunities, and to continue to grow and

survive, they must do this on an ongoing basis.

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Business development is a critical part of strategy…

Grow Value

Fast or Faster

Looks pretty straightforward, but...

Searching for new opportunities, selecting among identified opportunities, building new businesses, running existing ones, exiting others – all may need to be done at once...

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What are your business development challenges?

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Business development processes deserve more attention. Better processes yield better results…

Establish Business Development and Innovation Foundation Implement business development process, tools, templates, org approaches

Step 1: Assess Current State Identify strengths, distinctive

competencies, assets, capabilities

Step 2: Identify Opportunities Build idea stream, assess, evaluate, size

and prioritize opportunities

Step 3: Test and Validate Test and validate opportunities, build out

new required competencies and capabilities Toolsets

Custom

er Intimacy

Portfolio M

anagement

People &

Culture

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What does a holistic BD process look like?

Design, Construction, & Launch

Phase: Feature definition

through deployment of products and services

Portfolio Management Phase: Goal is to manage the

product life-cycle relative to customer needs after

launch and over time

Innovation Phase: Goal is a pipeline of “on point” business plans that align with

emerging customer needs and trends.

Innovation Stages v  Idea Funnel

v  Concept Development v  Business Case

DCL Stages v  Detailed Requirements

v  Solution Build v  Launch

Portfolio Management Stages v  Post-Launch Audit

v  Life-Cycle Management

Customers

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Business development process best practices…

-  Build on your distinctive competencies

-  Define a clear value proposition and adapt to key audiences

-  Create an Ideal Prospect Profile -  Who do you want to do business with? -  Who is a best fit with your value? -  Where are they?

-  Incorporate voice of prospect/customer throughout the BD process

-  Derive value from information and measure return on learning: ROL

-  Get the right talent to lead the process

-  Create a supportive organizational model

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BD is different from core product development… -  Focus on Horizon 2 and 3 opportunities -  More Voice of Customer, much more… -  Different content in your Business Plans:

Problem Statement The primary problem or need is… Workflow challenges…

The problem affects… Meeting or exceeding customer, partner needs in regards to…

The impact of which is… Inefficient acquisition and allocation of resources…

A successful solution is… Ensure improved allocation of resources and on time delivery of…

Target Problem Statement, Workflow, and Solution

Locator Services

Information Search

Product & Price

Comparison Offers and Promotions

Purchase Decision

Payment and

Information Exchange

Customer Comms and

Account Servicing

Loyalty Programs, Rebates,

Future Offers

Warranty & Relationship

Mgmt

Understand your Current State -  Existing competencies, capabilities, assets

Understand your BD maturity and gaps -  Use of customer-intimate best practices -  Identifying the best organizational and governance model

Identify your Process Leader and Growth Council -  Talent availability -  Can you share resources?

Customize Tools and Templates -  Adapt to your strategy and scale -  Deploy and refine

Adopt a Stage Gate Approach: Maximize Opportunities, Minimize Risks - Approve and invest over time as opportunities becomes more evident

Be Ready to Iterate, You May Not Get It Right the First Time

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Customizing the process for your needs…

“There’s no good just being better, you got to be different.” -Charles Handy

How do we get useful Market Intelligence? Market Facing Insights, Analysis & Action Plans

RICK CLAAR

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The NBD process requires both internal and external inputs, analysis and action. One without the other will surely fail.

A Robust Business Development Process– Internal & External Inputs

External Market, Customer, Competition

Internal Company

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NBD ideas can be generated from a variety of sources. But all can fit into a simple 2+2 matrix.

New

Old

Mar

kets

New Old Products/

Services

Competitive Benchmarking

Core Competency Analysis

Brainstorming

Previous Attempts

Secondary Research Direct Interviews

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Typical Secondary Research Sources:

•  Patents, Research data

•  Technical reports/articles

•  Company reports •  Government data •  FOIA searches •  Other (newspapers,

etc.)

Telephone and personal interviews within the defined value chain(s).

•  Key elements within the Value Chain(s) v  Determine all

levels v  Select key

companies within each level

v  Identify key decision making functions

•  Industry experts •  Legislative/ regulatory

agencies •  Suppliers •  Competition

Data Sources Market Data

Direct Interviews

Analysis

Reporting

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Value Chain Example Packaging Side Product Side

Raw Materials

Rigid Packaging

Manufacturers

Raw Material Suppliers

Intermediate Formulators

Hand Care Skin Care Oral Care

Retailers Grocery Stores Drug Stores Salons

•  Polymers •  Rheology Modifiers •  Fragrances •  Dispersants •  Preservatives •  Dyes •  Fillers •  Biocides •  Other

•  Polymers •  Rheology Modifiers •  Additives •  Dyes/Pigments •  Other

•  Inks •  Adhesives •  Resins

Substrate Flexible Product

Suppliers

•  Films •  Roll •  Paper

Product Formulator

Rigid Packaging Materials

•  Glass •  Aluminum •  Steel •  Plastic

Distribution

Personal Care Manufacturer

Contract Packaging

Converters

Personal Care Market

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Filtering Process - Typically two sets of filters can be employed to go from 50+ ideas to 10 to the top 3 commercially viable growth plans.

Ideas H

ighe

st P

riorit

y

Drill Down

Filte

r

Filte

r

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Filtering Output Example

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5

5.0

2.0 2.5 3.0 3.5 4.0 4.5

Cellulose Filter Media Coating

Storage Container

Resin

Ag Films

Nutraceuticals Packaging

Gasket, Pipe, Hoses

Coating/ Resin

Carpet Coatings/

Fiber

Paperboard/ Corrugated

Coating

Institutional Floor Polish

Animal Health

Packaging (Drugs

& Food)

Liquid Release

Coatings- Composites

Digital Inks

Blood Vial

Resins

Food Packaging Coatings

Industrial Medical

Electronic

Currency Coatings

Constr.

Fabric/ Apparel/ Textile

Coatings/ Fiber Automotive

Cladding/ Fixtures Resin

or Films

Electronic Packaging Coatings/

Films Automotive Cladding/ Fixtures Resin

and Film

White Board

Coatings/ Resin Freeze

Indicator Label

Coatings, Resin or Film

Clean Room

Pneumatic Tire

Coatings/ Resin

Band Aid

Paper Coating

Oil & Gas Production (e.g.

gaskets, etc.)

Biological Production

(tubes, liners, disposable

reactor bags)

Septa Coatings

Milk/Coating = Resin = Film = Combination =

Leve

l of U

nmet

Nee

d

Gasket Pipe, Hose Coating/

Resin

Charcoal Bags

Cosmetics

Medical Packaging Coatings/

Films

Automotive & Industrial

Fuel Tanks

Pressure Sensor

“Can We Win?” Composite Metric

Size, Growth, Profit, Competition, Customer Set, others

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Current Highest Priority Opportunities

Action Plan – Ultimately, a road map where current and long-term growth can be achieved.

Longer-Term

Current

Longer-Term Opportunities

Dispose

Archive for later review Archive

Dispose

How do we Engage Employees for Internal Customer Intelligence?

BILL HOFFMAN

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Too Often The Case. . .

Used with Permission, FRONTLINE INSIGHTS LLC 2014

Extracting the valuable content that frontline employees generate as a result of their day-to-day customer and non-customer-facing experiences provides a unique perspective to enhance your Business Development capabilities.

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Frontline Insight – Why?

Proprietary Insights Benefits


Prioritizes levers – what is really important

ROI realization in CE enhancement (or not)

Increased employee engagement

Customer Experience Enhancements

Technical issues

Purchasing / Non-Purchasing Customers

Success indicators (e.g., promotions, product,

merchandising, pricing)

Innovation / New ideas

Bill Hoffman

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Are you REALLY listening to your Front Line?


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The Approach

Employees listen to customers and observe behavior

Provide an easy and fast method

for sharing insights

Process the input to determine key

themes

Provide a summary of what

you heard

Leadership and business teams can pose questions to

employees

Communicate insights to relevant corporate teams

AND front line leaders

35 Used with Permission, FRONTLINE INSIGHTS LLC 2014

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Why Listen Employees offer a unique perspective on the business from direct interactions with customers on a daily basis.


How employees interpret these daily interactions with customers matters, as it provides another clue to add further clarity on the overall customer experience.

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#1 Driver of Customer Engagement? Employee Engagement.

“Outstanding leaders go out of their way to boost the self-esteem of their personnel. If people believe in themselves, it's amazing what they can

accomplish.” - Sam Walton

It’s all about employee engagement… Listening = Respect. Employees want to be

heard – it tells them that what they have to say is worth the time it takes to listen and it tell them that

they matter.

Purpose. When employees contribute to something that

drives value to an organization, they feel

enriched for having contributed to the company.

Performance. According to Gallup, engaged

employees simply perform better than unengaged

employees.

Solutions. Engaged employees are more likely to find solutions to potential

customer problems and even more powerful, they will share those solutions.


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It Matters

Today, no leader can afford to be indifferent to the challenge of engaging employees in the work of creating the future. Engagement may have been optional in the past, but it's pretty much the whole game today. -Gary Hamel


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Summary Employees have unique insight

▪  Employees can provide insight that no one else has, or can provide ▪  They talk to your customers who purchase and those who don’t ▪  Their interpretation of the customer’s perspective matters

Front line insights drive value to the business

▪  Our previous experience has shown a strong correlation between employee contribution and customer satisfaction, close rate, and financial performance to budget ▪  Insights are expensive – gathering them from employees is relatively cheap ▪  You have sensors in every location that you are paying – leverage that ▪  Guide your research investment with the clues the front lines are providing

Leaders ask good questions

▪  Too often business teams rely on input from a single location visit, or a small pool of employees – you need to broaden the audience ▪  Understanding employee perspective prior to a new campaign, or product

launch will save you time and money and reduce surprises ▪  Enhance credibility of business cases by having facts from the front lines

Listening to employees drives engagement

▪  A great customer experience starts with a great employee experience ▪  Employees who are heard feel more appreciated ▪  Our past history has shown a direct correlation between employee

contribution and engagement scores

Why it matters


What Resources do we have to support Acquisitive Growth?

KEITH OLSON

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Acquisitive Growth & Business Development Activities Supported by

Granite Equity

Add-on Acquisitions to Improve Strategic Positioning

Add-on Acquisitions to Increase Capabilities

Add-on Acquisition to Expand into New Markets

Asset Sales to Redirect Company Resources

Support for Acquisitive Growth and Organic Growth

• Granite Equity is here to assist you with your acquisitive growth planning, prospect identification, due diligence, and transaction execution.

• Our acquisition process has been refined over many years and we are happy to offer our experience and support as you think about opportunities for acquisitive growth.

• By leveraging similar tools and relationships, Granite Equity can also help to identify organic business development opportunities.

Acquisitive Growth

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Organic Growth

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Acquisition of Gibson Laboratories in December 2008

Competitive Landscape Before Competitive Landscape After

Fisher

BMX

MBL Fisher

BMX

MBL + GLI

1. Improved strategic positioning within a market that was served by 4 firms. 2. Increased revenue and EBITDA by approximately 50%. 3. Closed the “back door” to new entrants.

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Strategic Acquisition at Microbiologics

GLI

Divestiture of the Gibson Laboratories Culture Media Business

Product Offering Before Product Offering After

1. Company lacked scale to compete in lower margin culture media business. 2. Customer list and inventory were sold to a friendly distributor. 3. Margins increased after divesting the product line.

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Asset Sale at Microbiologics

Bacterial Controls

Fungal Serology Test Kits

Culture Media

Bacterial Controls

Fungal Serology Test Kits

Acquisition of Phthisis Diagnostics in October 2013

Product Offering Before Product Offering After

1. Expanded capabilities and product offering (patents, equipment, inventory). 2. Strengthened the team by adding key scientific / technical personnel. 3. Established option value for the next horizon of growth.

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Capability / Product Acquisition at Microbiologics

Bacterial Parasites Fungal

Viral

Bacterial Parasites Fungal

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IBISWorld – a tool for industry level insight 1.  A tool to help you

analyze your industry.

2.  Better understand your customers, suppliers, and competitors.

3.  Reports cover more than 700 industries.

4.  Updated frequently with significant detail.

5.  Could be used at your company for strategic planning and business development.

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Hoover’s – a tool for company level insight 1.  A tool to help you

identify potential acquisitions.

2.  Could be used at your company for organic growth and business development.

3.  Global database of more than 80 million companies.

4.  Identify opportunities around the world.

5.  Relatively inexpensive and easy to use.

10,000 Prospects

Industry

1,000 Prospects

Industry Location

100 Prospects

Industry Location Revenue

By adding a geographic screen we can narrow the universe of potential prospects.

Starting with a universe of more than 80 million companies we can quickly screen by industry.

By including a revenue screen we can further refine the universe of potential prospects.

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Using Hoover’s to filter opportunities

Once we have developed a manageable list of potential prospects we can further research the companies to identify the best possible candidates for acquisition or business development.

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Value Creation Partners

Consulting Firms

Externally Focused

Internally Focused

Investment Banks

Generalists

Specialists

•  Industry Studies • Market Research • Competitive Analysis • Guide Internal Initiatives

• Transactional experts • National or international coverage

across a wide range of industries

•  Industry experts • National or international coverage

focused on specific industries

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Granite’s List – a directory of strong relationships

• Lean Manufacturing • Product Development • Technology Implementation • Leverage External Insight

What has GeoComm learned in its Business Development Journey?

JOHN BRYANT

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Situation

Gap

Current Revenue Plan

$0

$5

$10

$15

$20

$25

1 2 3 4 5 Years

Million Goal

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Progress To-Date

• Structure • Roles, Responsibilities • Leader

• Portfolio management process • Cross-Functional Collaboration • Opportunity Management

People

Process Information

Customer Intimacy

• Net Promoter Score • Customer Advisory Council • Quarterly PM visits

Opportunity Management

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Progress To-Date

• Structure • Roles, Responsibilities • Leader

• Opportunity Management • Cross-Functional Collaboration • Portfolio management process

• GeoComm team • Microsoft SharePoint • Market research;

primary and secondary

People

Process Information

• Net Promoter Score • Customer Advisory Council • Quarterly PM visits

Customer Intimacy

• One of the most widely-used quantitative methods

•  ‘Trade-off’ approach delivers more reliable results

Information: Conjoint Market Research Tool

Example

• Granite Equity owns Sawtooth Software – industry leading tool

• Proven results

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Next Steps:

•  Complete initial scoring of 35 top ideas

•  Move top candidates to next stage gates:

•  In depth market research

•  Business case

•  Business plan

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Q & A

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Documents

Leadership Day Growth & Business Development Panel