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PwC’sStrategy&
An introduction
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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.
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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
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or g ani z at i on s & p e o pl e
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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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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.
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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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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.