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     PwC’sStrategy&

     An introduction

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    1

    We are part of the PwC network of rms with more than 195,000 people committedto delivering quality in assurance, tax,and advisory services.

    We are located in 157 countries around

    the globe.

     strategy+business (s+b) magazine isPwC Strategy& LLC’s award-winningpublication; its website was namedone of the Top 25 Websites for CEOsby Forbes. Its readership spans morethan 1,000,000 engaged businessleaders from around the world.

    We are a global team of practical strategists, committed to helping you seize essential advantage by working alongside you to solve

     your toughest problems, and capture your greatest opportunities.

    This means helping you undertake complicated, risky change. Ourheritage of working on clients’ toughest problems, combined withthe breadth and depth of the PwC network, means that we deliverspeed, certainty, and impact.

     Practical

     strategists

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    Who we are

    We are

    reinventing

     strategyconsulting as

    the world’s

    leading Strategy-

    through-

     Execution frm

    Strategy& was formed on March 31, 2014, when Booz & Companycombined with PwC to create a new kind of consulting business.

    Together, we’re reinventing strategy consulting as the world’sleading Strategy-through-Execution rm. We oer clients everythingthey need, all under one roof: deep strategy consulting expertise,a proven track record of execution and delivery, and unrivalledglobal scale and experience.

    Strategy& brings together the best strategy and execution talentfrom across the PwC network, building on the proud heritage ofboth organizations.

    Strategy& carries forward the century-strong legacy ofBooz & Company. The namesake of the oldest continually existingstrategy consultancy in the world, Edwin Booz actually establishedthe entire management consulting profession in 1914. Ourconsultants have always been celebrated as practical strategists— making us ideally suited for delivering Strategy-through-Execution as part of PwC.

    PwC has been helping clients solve their toughest problems and

    capitalize on their greatest opportunities since 1849. That’s whenSamuel Price rst began his business in London, followed byWilliam Cooper in 1854. For more than 150 years PwC and itspredecessor rms have built lasting relationships, with clientsthat deliver exceptional value. That’s why we were so quick tospot the emerging need for Strategy-through-Execution servicesand nd a way to deliver this to our clients.

    On these storied foundations, we’ve built a distinct and powerfulstrategy house within the global PwC network. Our story for the

    next century? Delivering exactly what clients need to transformtheir future and drive lasting growth.

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    Our people are committed to our clients’success, focused on helping you achieveessential advantage.

    We are collaborative, yet we challengeconventional assumptions and raise thebig questions that need answers.We tell it like it is, bold and unafraid.

    By doing that, we work with you to developthe practical strategies you need.

    We care about your organization and your

    success. We help you tackle your toughestchallenges. We measure ourselves by ourclients’ success and particularly by theimpact you achieve in the market.

     As part of the PwC network, we aremembers of a global team recognizedfor its professionalism and trust.

    Who we are

    Practicalstrategists

    Collaborative

    by nature

    Sleevesrolled up

    Committed toour clients’success

    Value proposition

    Strategy& 3

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     A few dierentiating capabilities dene who you are and how you add value.

    Winning companies build on their strengthsand identify the few key capabilities theyneed to develop in order to win in theirchosen markets.

    Foresight about how your markets aredeveloping is essential to make long-termchoices and transform big ideas into plansthat achieve real results.

     Value for you is delivered by smartstrategies, well executed. Our approach

    is founded on these beliefs.

    What webelieve

     A fewdiferentiating

    capabilitiesdrive identityand success

    Foresight isessential tobuilding strategiesthat last

     Value is deliveredby smartstrategies,

     well executed

    Strategy& 4

    What we do

    We help you build a capabilities systemthat’s right for you, that builds on what

     you already do well and that deliverscompetitive advantage.

    We don’t just bring insight. We alsooer industry-leading foresight andmethodologies to get you the value

     you need and prepare you for a worldthat will be dierent from today’s.

    Being part of the PwC network means we bring additional experience, trustedrelationships, and a reputation forquality and independence. So we can gobeyond ideas, delivering a broad rangeof technical and functional skills to solve

     your challenges, anywhere in the world.

     You get the right expertise at the righttime. As a result, you get the value youare looking for: better insight, practicalsolutions, greater benets, and a better

    return on investment.

    Help clientsidentify and buildthe capabilitiesessential to

    their advantage

    Develop strategiesbased on thosecapabilities

    Bring leadingindustry andfunctional insights

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    Strategy& 

    The world is moving faster than ever. Digitization, increasedglobalization, and resource scarcity are just some of the mega-trendsimpacting all industries. Our platforms enable companies to seizeessential advantage amid this evolving landscape.

    Capabilities-Driven Strategy and Growth  A dierentiated approach to strategy that is rooted in thebelief that a few distinctive capabilities drive a company’sidentity and success.

     Fit for Growth*  A Strategy& trademarked and integrated way to unlockclients’ potential, build up capabilities, and generatesustainable growth by focusing on three elements: priority

    setting, optimizing costs, and reorganizing for growth.

    Digital Creating integrated end-to-end digital solutions aroundinnovation, user experience, analytics, and optimization,from strategy to execution.

    Deals 

     A unied go-to-market approach marked by enhancedclient solutions across the Deals continuum— fromstrategy to execution.

    * Fit for Growth is a registered service mark of PwC Strategy& LLC in theUnited States.

    5

     Major platforms

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    The Essential Advantage (Harvard BusinessReview Press),by Paul Leinwand andCesare Mainardi

    The Capabilities Premium in M&A ( strategy+business),by Gerald Adolph,Cesare Mainardi, and J. Neely

    The New Supercompetitors ( strategy+business),by Thomas N. Hubbard,Paul Leinwand, andCesare Mainardi

     Is Your Company Fit for Growth? ( strategy+business),by Deniz Caglar,Jaya Pandrangi, andJohn Plansky 

    Creating an OrganicGrowth Machine ( Harvard Business Review),by Ken Favaro, David Meer,and Samrat Sharma

     How Ready Are You for Growth? ( strategy+business),by Ashok Divakaranand Vinay Couto

    The $112 Billion CEOSuccession Problem ( strategy+business),

    by Ken Favaro,Per-Ola Karlsson, andGary L. Neilson

    10 Principles of LeadingChange Management( strategy+business),

    by DeAnne Aguirre andMicah Alpern

    The Critical Few ( strategy+business),by Jon Katzenbach,

    Rutger von Post, andJames Thomas

     Key publications

    6Strategy& 

    A morestrategic approach to costscan help you prepareforthe next

    round of expansion.

    Isyour companyfit forgrowth?Many companies

    todayarenot. Thewaythey managecostsand deploy 

    thei rmoststrateg icresourcesi spreventi ng theex-pansiontheyneed.But theydon’trealizeit —atleastnotyet.

    Tobesure,manyof thosecompani esare i nbet-terfinancialshapetodaythan they’vebeeninfor alongtime.Having implementedcost-cuttingand auster-ityprogramsduringthe recession,theyhaverelatively healthybalancesheetsand sizablereservesof workingcapital.Theyhavestrengthenedtheirabilitytoweatherdownturnsand improvedtheirproductivity inwaysthatcouldpotentiallylast foryears.All theserestruc-turingactionswererequiredforsurvival between2008and2011.

    Butastheyshi f tthei rfocusf romthecostsi deof

    thel edgertotherevenuesi de, searchi ng forwaystomovebeyondcost cutting—entering newmarkets,

    commercializinginnovativeproductsand services,of-feringmorecompellingcustomervaluepropositions—thesecompaniesarestrategicallyandfinanciallyout ofshape.Theyhave notmadethe hardchoicesinvolvedinchannelinginvestmentsto thecapabilitiesthatareneededmost,and deemphasizingoreliminatingtheirotherexpenses.

    Howcanyoutellifyour companyisfitforgrowth?Hereisasimple,three-questiondiagnostic:

    •Doyou haveclearpriorities,focusedonstrategicgrowth,thatdriveyourinvestments?

    •Doyourcostsl i neupw i ththosepri ori t i es?Inotherwords,doyoudeployyourresourcestowardthemefficientlyandeffectively?   I   l

       l  u  s   t  r  a   t   i  o  n   b  y   P  a  u   l   W  e  a  r   i  n  g

    BY  DENIZ CAGLAR,  JAYA  PANDRANGI,

    AND   JOHN  PLANSKY

     

    Growth?IS  YOUR  COMPANY

    Fit forf      e at     ur  e s  

     or  g ani  z  at  i   on s  &  p e o pl   e

    f      e at     ur  e s  

     or  g ani  z  at  i   on s  &  p e o pl   e

    3938

      A new study of inorganic growth showsthat deals made to enhance or leverage

      the things that companies do wellconsistently outperform others.

    Itisaperennial questionineverymajor industry:

     Whatdistinguishesthe companieswitha trackrecordofM&Asuccess?Wethi nkwe’vefoundtheanswer—andafewcompanieshavefiguredi tout, too. It’sa businessstrategythat usescapabilitiesas thebasis forinorganicgrowth.

    Successfulacquirersmake M&Adealst hateither

    enhancetheir distinctivecapabilitiessystems,leveragethosecapabilitiessystems,ordoboth. Thesecompanieshavebeenrewardedwith dealsthataverage 12percent-agepointsmoreinshar eholderreturnthanM&A dealsbyotheracquirersi nthesameindustryandreg i on.Evenduringthedifficultyears sincethe2008economiccrisis,dealslinkedto acapabilities-drivenstrategyhave

    tendedtoincrease shareholdervaluefor theacquiringcompany—whilemost otherinorganicgrowthmoves

    haveledtoa lossofvalue.

    Thati sthekeyfindingofastudyweconductedi n2011,analyzingmore than300 transactionsbetween2001and 2009in eightindustry sectors:industrials,electricutilities,consumer staples,media,healthcare,chemicals,information technology,and retail.(SeeMethodology,page52.)Dealsdo betterwhenthe in-

    comingcompanymatchesthe acquiringcompany’sca-pabilitiessystem.Someindustries,such asinformationtechnologyandretail,showalarger effect;allindustries westudied,however,show aconsistent,observableca-pabilitiespremiuminM&A. (SeeExhibit1, page47.)Thesameconclusionsholdtrue inourresearch onsuc-cessfulserial acquirers(“Pac-Man”companies):Deals

    madewitha capabilitiesperspectivearefar morelikely togeneratevalueovertime.   I   l   l

      u  s   t  r  a   t   i  o  n   b  y   B  r   i  a  n   C  a   i  r  n  s

     TheCapabilitiesPremium inM&AbyJ.NeelyandCesare Mainardi

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       I   l   l  u  s   t  r  a   t   i  o  n   b  y   F  e  r  n  a  n   d  o   V  o   l   k  e  n   T  o  g  n   i

    FOR

    HOW

    ARE 

    YOU

    READY 

    GROWTH

    ?A BOOZ & COMPANY STUDYREVEALS THAT ONLY

    17 PERCENT OF COMPANIES

    ARE POISED FOR A

    PROFITABLE FUTURE.

    BY ASHOK DIVAKARAN AND VINAY COUTO

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       I   l   l  u  s   t  r  a   t   i  o  n   b  y   G  r  a  n   t   S  n   i   d  e  r

    The Critical Few:Components of a Truly EffectiveCulture

    Sometimes corporate culture manifests   itselfinamake-your-own-tacopartyin theofficekitchenette.Sometimesyoucanseeitwhenanoutdatedphonebankisconvertedintoan on-siteicecreamshop.Andsome-timesit’sondisplaywhen seniorleaderspickuppaint-brushestoturnformerlybland officewallsintoelectricblueworkspaces.Theseare examplesofthe “CultureBlitz”atworkat SouthwestAirlinesCompany,wherea40-yearcultureis stillgoingstrongandisfurther in-vigoratedbytravelingteamswhovolunteereveryyearto

    visithundredsofemployeestoshow theirappreciation. Andit’sinfectious.

    MaryWidenisa SouthwestCultureBlitzmember whowillneverforget thefirst timeshe“hokeyed”anairplane.(Althoughthehokeyisinfact alinedance,atSouthwestit’salsothenameofthe smallcarpetsweeperusedtoclean theplanebetweenflights.)It’s tradition-allytheresponsibilityof theflightattendantsto cleantheplane,but onceina whileCultureBlitzmemberstakeoverthis taskandgive theflightattendantstime

    Forget the monolithic changemanagement programs and focuson the elements of your culturethat drive performance.

     by Jon Katzenbach,Rutger von Post, andJames Thomas

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     or  g ani  z  at  i   on s  &  p e o pl   e

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    10 PRINCIPLESOF LEADINGCHANGEMANAGEMENT

       I   l   l  u  s   t  r  a   t   i  o  n   b  y   L  o   C  o   l  e

    by DeAnne Aguirre and Micah Alpern

    Thesetime-honored tools and

    techniques can helpcompani es

    transform quickly.

    Sincethemid-2000s,organizational change

    management and transformationhavebecome

    permanent features of thebusiness landscape.

    Vast newmarkets and labor pools haveopened up,

    innovativetechnologies haveput once-powerful

    business models onthechopping block,and capital

    flows and investor demand havebecomeless

    predictable.Tomeet thesechallenges,firms have

    becomemoresophisticated inthebest practices for

    organizational changemanagement.Theyare far

    moresensitivetoand morekeenlyawareof therole

    that cultureplays.They’vealsohad toget much

    better ontheir follow-through.

    f      e at     ur  e 

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     or  g ani  z  at  i   on s  &  p e o pl   e

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    THENEWSUPERCOM PETITORS

       I   l   l  u  s   t  r  a   t   i  o  n   b  y   J  a  v   i  e  r   J  a  e  n

    BY THOMASN. HUBBARD,PAULLEINWAND,ANDCESARE MAINARDI

    SINCE THE MID-1990S, THE SOURCE OF COMPETITIVE

    advantagehasbeenshifting.Leadingcompaniesusedtobediverseconglomeratesthatbasedtheircompetitivestrategyonassets,positions,andeconomiesofscale.Today’smarketleaders,bycontrast,aremorefocusedenterprises.Theydonotfollowthetraditionalportfoliostrategiesofseekingshort-termprofitabilityorgrowthwherevertheycan

    findit.Rather,theyrecognizethatvalueiscreatedbytheirdistinctivecapabilities:whattheycandoconsistentlywell.Theirstrategicapproach,whichisbasedonasinglepowerfulvaluepropositionbackedupbyafewmutuallyreinforcingcapabilities,givesthemacontinuingadvantageovertheirrivals.Astheyconsolidatetheireffortsaroundthisapproach,theyfundamentallyreshapetheirindustries.

    COMPANIES THAT REALIZE THEPOWER OF THEIR CAPABILITIES CANSHAPE HOW INDUSTRIES EVOLVE.

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       I   l   l  u  s   t  r  a   t   i  o  n   b  y   M  a  r   t   i  n   L  e  o  n   B  a  r  r  e   t  o

    The$112 BillionCEO Succession

     ProblemPoorplanning forchanges inleadershipcostscompanies dearly.Gettingit rightisworthmorethanyoumightthink.byKenFavaro,Per-OlaKarlsson,andGaryL.Neilson

    Costscanmountquickly  whenthechief executiveofficerofa 

    largecompanyis firedordeparts suddenlywithoutan obvious

    internalreplacement.Thetypical seven-figureseverance

    packageandsix-figure retainerforan executivesearchfirm

    arejustthe beginning.Boardmembersmight havetofly in

    onshortnotice foranemergencymeeting. Asmallarmy of 

    professionals—allof whomchargeby thehour— begins

    tomobilize:communicationsconsultantsandemployment

    lawyers,moversandrelocation experts.Thelongerthe clock

    ticks,thehigher thefigureon themeter.

     Andthoseare justthehard, easilyquantifiableimpacts.

    Theypalein comparisontotheless visiblecosts.Turmoil

    anduncertaintyat thetopfilter quicklydownthrough the

    organization,slammingthebrakes ongrowthinitiatives,

    hinderingtheclosing ofvitaldeals, andcausing somevalued

    employeestostartlooking fornewpositionselsewhere.

    Becauseunexpectedsuccessionscan paralyzeeventhe best-

    functioningcompanies,theycan wreakaharsh tollon

    revenues,earnings,and stockprices.

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    strategyand.pwc.com

    © 2015 PwC. All rights reserved. PwC refers to the PwC network and/or one or more of its member rms, 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.

    Strategy& is a global team of practicalstrategists committed to helping youseize essential advantage.

    We do that by working alongside youto solve your toughest problems andhelping you capture your greatestopportunities. These are complex andhigh-stakes undertakings — oftengame-changing transformations. Webring 100 years of strategy consultingexperience and the unrivaled industryand functional capabilities of the PwC

    network to the task. Whether you’recharting your corporate strategy,transforming a function or business unit,or building critical capabilities, we’ll help

     you create the value you’re looking for with speed, condence, and impact.

    We are part of the PwC network of rmsin 157 countries with more than 195,000people committed to delivering quality inassurance, tax, and advisory services. Tellus what matters to you and nd out moreby visiting us at strategyand.pwc.com.