Description
Mr. Grant combines a track-record as Board Director, Investor, and Executive Management Advisor in global corporations.
Lean Growth 3 Ways
Applied Value
Linnégatan 18, Floor 8
PO Box 5047
SE-102 41 Stockholm, Sweden
Phone: +46 (0)8 562 787 00
Fax: +46 (0)8 562 787 01
www.appliedvalue.com
Presentation
January 28, 2013
2
IDEON Lund_2013-01-28
Lean Growth 3 Ways
My background
The Jan Stenbeck principles
The Applied Value Group
Lean Growth I – large companies (Ericsson)
Lean Growth – our philosophy
Lean Growth III – micro enterprises (Hand in Hand)
Lean Growth II – small companies (Robust Steel Doors)
Agenda – Lean Growth 3 ways:
3
IDEON Lund_2013-01-28
Lean Growth 3 Ways
Bruce Grant 410 Mariner Dr, FL 33437, USA
US Mobile: +1 781 929 6925
SWE Mobile: +46 704 269 260
Email: [email protected]
Date of birth: 1959-05-30
Mr. Grant combines a track-record as Board Director,
Investor, and Executive Management Advisor in global
corporations. His expertise and experience ranges from
Strategy and Turn-around implementation to
Organization and Supply Chain best practices.
Professional Career
Applied Value Group Founder, Chairman
and Senior Partner
1997-present
NOTE (publ) Board Director
Chairman
2010-present
2007-2010
Human Care Chairman 2004-present
Stille (publ) Board Director 2006-present
Tele 2 (publ) Chairman
Board Director
2002-2003
2000-2002
Metro (publ) Board Director 2000-2003
Transcom (publ) Board Director 2000-2003
Kinnevik (publ) Board Director 1998-2003
Korsnäs Lead Board Director 1998-2003
Korsnäs Packaging Chairman 1998-2003
Millicom Audit Committee 2002-2003
XSource CEO 1998-2002
Arthur D. Little SVP and MD of
North America
1991-1997
Cresentia Founder and CEO 1984-1991
Management Consulting High-lights
Vestas Advisor to Chairman and Executive
management on Turn-around
2012-
RIM Advisor to CEO and COO 2012-
Sony
Mobile
Advisor to Chairman, CEO,
Executive management on Turn-
around; Sales & Marketing,
Organization and SCM
2009-
General
Motors
Advisor to head of Purchasing
Interim Exec Director of Steel
commodity
Strategy and implementation
(negotiation) for savings in Chemical,
Electrical and Metallic commodities
2003-
Ericsson Advisor to Executive management
and Regional Presidents on
Profitability Improvements
Projects conducted world-wide
2001-2011
Maersk Advisor to CEO on corporate level
organization and restructuring
2009
Volvo Volvo Renault merger/exit 1993-1994
Volvo Cars 1989-1995, Volvo Trucks
1993-2006, Volvo 3P 2005-2006
1989-2006
4
IDEON Lund_2013-01-28
Lean Growth 3 Ways
My background
The Jan Stenbeck principles
The Applied Value Group
Lean Growth I – large companies (Ericsson)
Lean Growth – our philosophy
Lean Growth III – micro enterprises (Hand in Hand)
Lean Growth II – small companies (Robust Steel Doors)
Agenda – Lean Growth 3 ways:
5
IDEON Lund_2013-01-28
Lean Growth 3 Ways
The Applied Value Group is today a combination of Lean Growth
Consulting, Entrepreneurship, and Social Responsibility.
Applied Value Group
Public & Private
Investments
Management
Consulting
Service
Engagements
Entrepreneurship Lean Growth Social Responsibility
6
IDEON Lund_2013-01-28
Lean Growth 3 Ways
Founded in 1997, Applied Value is a management consultancy of
close to 100 consultants focusing on business-to-business industries:
Stenbeck Group
Automotive & Transportation
Telecom
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
Engineering &
Med Tech
Process
Services
2010 2011 2012
7
IDEON Lund_2013-01-28
Lean Growth 3 Ways
My background
The Jan Stenbeck principles
The Applied Value Group
Lean Growth I – large companies (Ericsson)
Lean Growth – our philosophy
Lean Growth III – micro enterprises (Hand in Hand)
Lean Growth II – small companies (Robust Steel Doors)
Agenda – Lean Growth 3 ways:
8
IDEON Lund_2013-01-28
Lean Growth 3 Ways
Ten Principles of Lean Growth (Jan Stenbeck).
1. Minimize the number of organizational layers and let all managers have at least 10 direct
reports - create a work force that is geared towards multitasking
2. Define and document critical work processes for efficient cross-department cooperation
3. Do not customize non-customer critical activities
4. Utilize shared services to the fullest extent and outsource whenever it makes sense
5. Minimize complexity by focusing only on profitable products, services and customers
6. Time is an asset which should be higher valued than money - both are easy to waste, but
you can never win back lost time
7. Overstaffing never pays - expenses are never investments - save in the office, spend the
company’s money as if it was your own
8. Reward the top performers and coach the individuals that have the right attitude but require
further skills or experiences
9. The most important step in servicing your customer is to communicate with them and listen
to them - listen more to your customers and less to your organization - never let engineers
define a product - never let sales people set prices
10. Be first, with minimal overhead, and worry about your variable costs later - small sales can
then only lead to small losses - the only sustainable competitive advantage comes from
superior cost and capital efficiency
9
IDEON Lund_2013-01-28
Lean Growth 3 Ways
My background
The Jan Stenbeck principles
The Applied Value Group
Lean Growth I – large companies (Ericsson)
Lean Growth – our philosophy
Lean Growth III – micro enterprises (Hand in Hand)
Lean Growth II – small companies (Robust Steel Doors)
Agenda – Lean Growth 3 ways:
10
IDEON Lund_2013-01-28
Lean Growth 3 Ways
What is complexity?
“A several billion dollar opportunity”
Jack Welch
Ex Chairman & CEO
General Electric
11
IDEON Lund_2013-01-28
Lean Growth 3 Ways
What is the single most competitive advantage a company has in
any industry?
SPEED
Jan Stenbeck Percy Barnevik
12
IDEON Lund_2013-01-28
Lean Growth 3 Ways
Applied Value’s overall Lean Growth philosophy.
SPEED FOCUS SIMPLICITY SUCCESS
=
13
IDEON Lund_2013-01-28
Lean Growth 3 Ways
Our Thrust is Lean Growth based on Focus, Simplicity, and Speed.
Lean Growth
Speed Simplicity
Focus
Define strategic focus areas,
excel in key capabilities and
use partners to handle non-
core activities
Complexity is the key cost and
capital driver and should be
minimized in all cases
Time is an asset which should
be valued greater than money
– you can win back money but
never time
• Strategic focus:
! Markets
! Customers
! Channels
! Products
! Technologies
! Suppliers
• Value proposition and
offering
• Value chain position / make
vs. buy
• Organizational efficiency
• Footprint optimization
• Supplier consolidation
• Level of variable vs. fixed
costs
• Process lead times:
! Time to market
(of a new product)
! Time to customer
(of a proposal)
! Time to invoice and cash
(of a delivery/shipment)
! Time to integration
(of an acquisition)
14
IDEON Lund_2013-01-28
Lean Growth 3 Ways
Our Services are tailored to accelerate Growth, improve Margins,
and/or reduce Invested Capital for our clients.
Lean Growth
Process Speed
Double Speed
Organizational Simplicity
Organizational 8D,
Activity Value Analysis
Business Focus
Customer and Product
Profitability
SG&A
Productivity
G&A efficiency
S&M efficiency
Pricing
Gross Margin
Improvement
Sourcing
Production
Cash management
Inventory management
Fixed assets leverage
Capital
Efficiency
Segmentation/Positioning
Go-to-Market
Product/Channel mix
R&D
Productivity
R&D efficiency
R&D effectiveness
15
IDEON Lund_2013-01-28
Lean Growth 3 Ways
My background
The Jan Stenbeck principles
The Applied Value Group
Lean Growth I – large companies (Ericsson)
Lean Growth – our philosophy
Lean Growth III – micro enterprises (Hand in Hand)
Lean Growth II – small companies (Robust Steel Doors)
Agenda – Lean Growth 3 ways:
16
IDEON Lund_2013-01-28
Lean Growth 3 Ways
Historically, operators’ CAPEX and revenue showed high
correlation but in 1999 and 2000 CAPEX grew very rapidly...
… but initially no one reacted to this warning signal.
-30%
-20%
-10%
0%
10%
20%
30%
%
G
r
o
w
t
h
Operator CapEx Growth
Operator Revenue Growth
17
IDEON Lund_2013-01-28
Lean Growth 3 Ways
Ericsson experienced a record ROIC development after the
2001-2003 turn-around program.
• Both Ericsson’s capital turnover
ratio and profit margin bottomed in
2002
• The restructuring efforts paid off
and both the capital turnover ratio
and the profit margin was improved
significantly in the following two
years
• The period of Applied Value support
has been highlighted in blue
)
Ericsson - ROIC Development 1999-2004
ROIC = Return on Invested Capital (actual return
that the company has generated after tax)
WACC = Weighted Average Cost of Capital (the
required return that the company must generate in
order not to destroy value, i.e. a ROIC>WACC
creates shareholder value)
Definition ROIC and WACC
0
1
2
3
4
-15% -10% -5% 0% 5% 10% 15% 20%
2004
2003
2002
2001
2000
1999
2%
5%
10%
40%
15%
60%
WACC = 16.3%
NOPAT margin
C
a
p
i
t
a
l
t
u
r
n
o
v
e
r
r
a
t
i
o
18
IDEON Lund_2013-01-28
Lean Growth 3 Ways
Ericsson faced a 13 billion SEK operational loss in 2001 which was
turned around into a 28.4 billion SEK operational income 2004.
Ericsson’s Situation at Year End 2001
• Ericsson faced a critical situation in the
end of 2001...
– An operational loss of 13 billion SEK
in 2001"
– A headcount of 107,000 employees
and 17,000 consultants in 2001"
– An operational expenditure (opex) of
88 billion SEK"
Ericsson’s Situation Q2 2004
• "but a drastic turnaround was achieved
in less than three years
– "was turned into a 28.4 billion SEK
operational income in 2004
– "was reduced to less than 51,000
employees in Q4 2003
– "was reduced to 33 billion SEK (Q2
2004)
19
IDEON Lund_2013-01-28
Lean Growth 3 Ways
In 2002-2004 Applied Value was involved in a multitude of projects
creating the greatest increase in shareholder value ever in Sweden.
OPEX
• Market Unit Consolidation
• BU Structure and efficiency
• Corporate Governance
• Headquarter and Support
Functions
• R&D Concentration
• IS/IT Cost Reduction and
Outsourcing
• Sales force efficiency
• Real Estate
Cost of Sales
• Manufacturing Outsourcing
• Local Cost of Sales
• Sourcing strategy &
organization
• Fact-based negotiations/
sourcing
• Product mix review
• Product rationalization
Cash Flow
• Joint Venture (Sony
Ericsson)
• Sales/leaseback
• Sold customer financing
stock
• DSO reduction (collection)
• Inventory reduction
• Capital restructuring
Applied Value
Involvement
20
IDEON Lund_2013-01-28
Lean Growth 3 Ways
My background
The Jan Stenbeck principles
The Applied Value Group
Lean Growth I – large companies (Ericsson)
Lean Growth – our philosophy
Lean Growth III – micro enterprises (Hand in Hand)
Lean Growth II – small companies (Robust Steel Doors)
Agenda – Lean Growth 3 ways:
21
IDEON Lund_2013-01-28
Lean Growth 3 Ways
Robust Steel Doors processes input materials to steel doors and
markets the products under own brands.
Robust Value Chain
Input materials
(e.g. steel sheets,
locks, isolating
material)
Manufacturing
(Nykroppa)
Robust Ståldörrar AB
Distribution
(Direct, Wholesaler,
Installation,
Construction)
End-customer
(Multi-dwellings,
Offices, Industries)
Direct sales
Installation
Wholesaler
Construction
Multi-dwellings and Offices
22
IDEON Lund_2013-01-28
Lean Growth 3 Ways
Robust Steel door has since AVG acquired the company increased
runrate (end 2012) turnover with 37% and multiplied EBIT with 31X.
6%
7%
3%
1%
1%
3%
14%
21%
26%
36%
38%
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
0
50
100
150
200
250
2005 2006 2007 2008 2009 2010 2011 2012 Runrate
end of
2012
2013 2014
Turnover EBIT%
MSEK EBIT%
AVG acquires
Robust Nov
2008
Avoid
bankruptcy
23
IDEON Lund_2013-01-28
Lean Growth 3 Ways
Fixed cost yields savings of 7 MSEK or 7% in EBIT improvement.
!"## !"#! !"#$ !"#% &'() +,-./0
!"#$%&$' )*$#+&,- !,,- .-,'/0&",1 234 526 478
9+*$% :,-0$ );;"0"$10< 77= 243 >33? 3=6
@/*&"&+%A"1B C-B+1"D+&",1 253 253 ?45
.-,'/0& !$#$*,EF$1& G,FE$&$10$ C#$-#"$H 62 4=2 ?27 7=2
9&-$+F*"1"1B ,; ;"1+10$ ,-B+1"%+&",1 5 588 5588
)10.2 34 4150 &'()67 +,-./0 !!8% #"9: # $$%"
I1'"-$0& G,%& > J$H 9E$1'"1B K$L+#",- 5 =88 5=88
M$'/0$' )1$-B< G,1%/FE&",1 > $*$0&-"0"&< +1' ,"* 5 888 5888
N,H$- )*$0&-"0"&< G,%& 2854>285? 488 488 =88
N,H$- M$1& 42O 42O
J$H 0,FE-$%%,- 288 288
)10.2 (;/0 4150 &'() +,-./0 !9"" ?!@ $"" $8!@
:
"
P
$
'
0
,
%
&
)A=; .=1A;< ./0+1;
Fixed cost actions EBIT impact 2011 to 2014
24
IDEON Lund_2013-01-28
Lean Growth 3 Ways
Variable cost actions yield +20% in gross margin improvement.
!"## !"#! !"#$ !"#% &'() +,-./0
!"#$% '()*+#$, - ./0 - 121 3 /.3 .22 2 //1
'4556 7)*+"%8#$, .02 910 / :.3
;#*5+4 ($ !"#$% 3/3 - 93. 1:. . 9-?
@5A)+4#($ (B 8+*%C D54%6 E%845 - 1// - 1//
')F84#4)4#($ B*(D G6)H#$+ 4( I-// 11/ 11/
)10.2 3+45/0 ,.054+.2 &'() +,-./0 # 66" $ #7$ 8 $!8 !77 #! 877
JDC*(K5A L(,#84#+8 -2/0 1/0 ..-1
)10.2 10954 3+45/0 /1:0 &'();< +,-./0 #7"8 %"8 !!#%
L5%$ !($K5*8#($ 7*(,*%D @'GM ./--=./-1 303 -901 -93/ -90/ 1::?
;#K5845A N65K%4(* ;((* 7*(A)+4#($ .3. 93/ :/.
)10.2 '= /1:0 &'();< +,-./0 7!7 #8!% #$>" #$8" >!8#
)?4@ .41?@3 ./0+1@
O
%
*
#
%
F
6
5
+
(
8
4
Variable cost actions EBIT impact 2011 to 2014
25
IDEON Lund_2013-01-28
Lean Growth 3 Ways
Reduced fixed cost and improved gross margin make added sales
highly profitable.
!"## !"#! !"#$ !"#% &'() +,-./0
!"#$% '()%*+",) -*, .,"$/0% 123 123
'*4)%,(5%$*4 '*+674$") 8 19: ; 22; 8 121 2 ;1;
8 ?8: ? @8; ;;1 @ ;9A
BCD= A 328 : 8A2 ; :A3
D/,""+"4% E$%0 F0*G")7G",) 8 ?39 8 9?@ ::A A ?11
H*,I$5 5*GG7#*,7%$*4 E$%0 JCK!LFCH 8 9?@ 8 ;?A A A92
H*,E7M 6,*I(5% I"N"G*6+"4% *- D8:3 I**, 8 ;A9 : 1;2 ? :21
=O.D 8 822 A;2 8 ;;9
H*,/" D@3 E$%0 6,$5" 92? 8@8 8 3;;
H'' 222 A33 8 :22
Mr. Grant combines a track-record as Board Director, Investor, and Executive Management Advisor in global corporations.
Lean Growth 3 Ways
Applied Value
Linnégatan 18, Floor 8
PO Box 5047
SE-102 41 Stockholm, Sweden
Phone: +46 (0)8 562 787 00
Fax: +46 (0)8 562 787 01
www.appliedvalue.com
Presentation
January 28, 2013
2
IDEON Lund_2013-01-28
Lean Growth 3 Ways
My background
The Jan Stenbeck principles
The Applied Value Group
Lean Growth I – large companies (Ericsson)
Lean Growth – our philosophy
Lean Growth III – micro enterprises (Hand in Hand)
Lean Growth II – small companies (Robust Steel Doors)
Agenda – Lean Growth 3 ways:
3
IDEON Lund_2013-01-28
Lean Growth 3 Ways
Bruce Grant 410 Mariner Dr, FL 33437, USA
US Mobile: +1 781 929 6925
SWE Mobile: +46 704 269 260
Email: [email protected]
Date of birth: 1959-05-30
Mr. Grant combines a track-record as Board Director,
Investor, and Executive Management Advisor in global
corporations. His expertise and experience ranges from
Strategy and Turn-around implementation to
Organization and Supply Chain best practices.
Professional Career
Applied Value Group Founder, Chairman
and Senior Partner
1997-present
NOTE (publ) Board Director
Chairman
2010-present
2007-2010
Human Care Chairman 2004-present
Stille (publ) Board Director 2006-present
Tele 2 (publ) Chairman
Board Director
2002-2003
2000-2002
Metro (publ) Board Director 2000-2003
Transcom (publ) Board Director 2000-2003
Kinnevik (publ) Board Director 1998-2003
Korsnäs Lead Board Director 1998-2003
Korsnäs Packaging Chairman 1998-2003
Millicom Audit Committee 2002-2003
XSource CEO 1998-2002
Arthur D. Little SVP and MD of
North America
1991-1997
Cresentia Founder and CEO 1984-1991
Management Consulting High-lights
Vestas Advisor to Chairman and Executive
management on Turn-around
2012-
RIM Advisor to CEO and COO 2012-
Sony
Mobile
Advisor to Chairman, CEO,
Executive management on Turn-
around; Sales & Marketing,
Organization and SCM
2009-
General
Motors
Advisor to head of Purchasing
Interim Exec Director of Steel
commodity
Strategy and implementation
(negotiation) for savings in Chemical,
Electrical and Metallic commodities
2003-
Ericsson Advisor to Executive management
and Regional Presidents on
Profitability Improvements
Projects conducted world-wide
2001-2011
Maersk Advisor to CEO on corporate level
organization and restructuring
2009
Volvo Volvo Renault merger/exit 1993-1994
Volvo Cars 1989-1995, Volvo Trucks
1993-2006, Volvo 3P 2005-2006
1989-2006
4
IDEON Lund_2013-01-28
Lean Growth 3 Ways
My background
The Jan Stenbeck principles
The Applied Value Group
Lean Growth I – large companies (Ericsson)
Lean Growth – our philosophy
Lean Growth III – micro enterprises (Hand in Hand)
Lean Growth II – small companies (Robust Steel Doors)
Agenda – Lean Growth 3 ways:
5
IDEON Lund_2013-01-28
Lean Growth 3 Ways
The Applied Value Group is today a combination of Lean Growth
Consulting, Entrepreneurship, and Social Responsibility.
Applied Value Group
Public & Private
Investments
Management
Consulting
Service
Engagements
Entrepreneurship Lean Growth Social Responsibility
6
IDEON Lund_2013-01-28
Lean Growth 3 Ways
Founded in 1997, Applied Value is a management consultancy of
close to 100 consultants focusing on business-to-business industries:
Stenbeck Group
Automotive & Transportation
Telecom
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
Engineering &
Med Tech
Process
Services
2010 2011 2012
7
IDEON Lund_2013-01-28
Lean Growth 3 Ways
My background
The Jan Stenbeck principles
The Applied Value Group
Lean Growth I – large companies (Ericsson)
Lean Growth – our philosophy
Lean Growth III – micro enterprises (Hand in Hand)
Lean Growth II – small companies (Robust Steel Doors)
Agenda – Lean Growth 3 ways:
8
IDEON Lund_2013-01-28
Lean Growth 3 Ways
Ten Principles of Lean Growth (Jan Stenbeck).
1. Minimize the number of organizational layers and let all managers have at least 10 direct
reports - create a work force that is geared towards multitasking
2. Define and document critical work processes for efficient cross-department cooperation
3. Do not customize non-customer critical activities
4. Utilize shared services to the fullest extent and outsource whenever it makes sense
5. Minimize complexity by focusing only on profitable products, services and customers
6. Time is an asset which should be higher valued than money - both are easy to waste, but
you can never win back lost time
7. Overstaffing never pays - expenses are never investments - save in the office, spend the
company’s money as if it was your own
8. Reward the top performers and coach the individuals that have the right attitude but require
further skills or experiences
9. The most important step in servicing your customer is to communicate with them and listen
to them - listen more to your customers and less to your organization - never let engineers
define a product - never let sales people set prices
10. Be first, with minimal overhead, and worry about your variable costs later - small sales can
then only lead to small losses - the only sustainable competitive advantage comes from
superior cost and capital efficiency
9
IDEON Lund_2013-01-28
Lean Growth 3 Ways
My background
The Jan Stenbeck principles
The Applied Value Group
Lean Growth I – large companies (Ericsson)
Lean Growth – our philosophy
Lean Growth III – micro enterprises (Hand in Hand)
Lean Growth II – small companies (Robust Steel Doors)
Agenda – Lean Growth 3 ways:
10
IDEON Lund_2013-01-28
Lean Growth 3 Ways
What is complexity?
“A several billion dollar opportunity”
Jack Welch
Ex Chairman & CEO
General Electric
11
IDEON Lund_2013-01-28
Lean Growth 3 Ways
What is the single most competitive advantage a company has in
any industry?
SPEED
Jan Stenbeck Percy Barnevik
12
IDEON Lund_2013-01-28
Lean Growth 3 Ways
Applied Value’s overall Lean Growth philosophy.
SPEED FOCUS SIMPLICITY SUCCESS
=
13
IDEON Lund_2013-01-28
Lean Growth 3 Ways
Our Thrust is Lean Growth based on Focus, Simplicity, and Speed.
Lean Growth
Speed Simplicity
Focus
Define strategic focus areas,
excel in key capabilities and
use partners to handle non-
core activities
Complexity is the key cost and
capital driver and should be
minimized in all cases
Time is an asset which should
be valued greater than money
– you can win back money but
never time
• Strategic focus:
! Markets
! Customers
! Channels
! Products
! Technologies
! Suppliers
• Value proposition and
offering
• Value chain position / make
vs. buy
• Organizational efficiency
• Footprint optimization
• Supplier consolidation
• Level of variable vs. fixed
costs
• Process lead times:
! Time to market
(of a new product)
! Time to customer
(of a proposal)
! Time to invoice and cash
(of a delivery/shipment)
! Time to integration
(of an acquisition)
14
IDEON Lund_2013-01-28
Lean Growth 3 Ways
Our Services are tailored to accelerate Growth, improve Margins,
and/or reduce Invested Capital for our clients.
Lean Growth
Process Speed
Double Speed
Organizational Simplicity
Organizational 8D,
Activity Value Analysis
Business Focus
Customer and Product
Profitability
SG&A
Productivity
G&A efficiency
S&M efficiency
Pricing
Gross Margin
Improvement
Sourcing
Production
Cash management
Inventory management
Fixed assets leverage
Capital
Efficiency
Segmentation/Positioning
Go-to-Market
Product/Channel mix
R&D
Productivity
R&D efficiency
R&D effectiveness
15
IDEON Lund_2013-01-28
Lean Growth 3 Ways
My background
The Jan Stenbeck principles
The Applied Value Group
Lean Growth I – large companies (Ericsson)
Lean Growth – our philosophy
Lean Growth III – micro enterprises (Hand in Hand)
Lean Growth II – small companies (Robust Steel Doors)
Agenda – Lean Growth 3 ways:
16
IDEON Lund_2013-01-28
Lean Growth 3 Ways
Historically, operators’ CAPEX and revenue showed high
correlation but in 1999 and 2000 CAPEX grew very rapidly...
… but initially no one reacted to this warning signal.
-30%
-20%
-10%
0%
10%
20%
30%
%
G
r
o
w
t
h
Operator CapEx Growth
Operator Revenue Growth
17
IDEON Lund_2013-01-28
Lean Growth 3 Ways
Ericsson experienced a record ROIC development after the
2001-2003 turn-around program.
• Both Ericsson’s capital turnover
ratio and profit margin bottomed in
2002
• The restructuring efforts paid off
and both the capital turnover ratio
and the profit margin was improved
significantly in the following two
years
• The period of Applied Value support
has been highlighted in blue
)Ericsson - ROIC Development 1999-2004
ROIC = Return on Invested Capital (actual return
that the company has generated after tax)
WACC = Weighted Average Cost of Capital (the
required return that the company must generate in
order not to destroy value, i.e. a ROIC>WACC
creates shareholder value)
Definition ROIC and WACC
0
1
2
3
4
-15% -10% -5% 0% 5% 10% 15% 20%
2004
2003
2002
2001
2000
1999
2%
5%
10%
40%
15%
60%
WACC = 16.3%
NOPAT margin
C
a
p
i
t
a
l
t
u
r
n
o
v
e
r
r
a
t
i
o
18
IDEON Lund_2013-01-28
Lean Growth 3 Ways
Ericsson faced a 13 billion SEK operational loss in 2001 which was
turned around into a 28.4 billion SEK operational income 2004.
Ericsson’s Situation at Year End 2001
• Ericsson faced a critical situation in the
end of 2001...
– An operational loss of 13 billion SEK
in 2001"
– A headcount of 107,000 employees
and 17,000 consultants in 2001"
– An operational expenditure (opex) of
88 billion SEK"
Ericsson’s Situation Q2 2004
• "but a drastic turnaround was achieved
in less than three years
– "was turned into a 28.4 billion SEK
operational income in 2004
– "was reduced to less than 51,000
employees in Q4 2003
– "was reduced to 33 billion SEK (Q2
2004)
19
IDEON Lund_2013-01-28
Lean Growth 3 Ways
In 2002-2004 Applied Value was involved in a multitude of projects
creating the greatest increase in shareholder value ever in Sweden.
OPEX
• Market Unit Consolidation
• BU Structure and efficiency
• Corporate Governance
• Headquarter and Support
Functions
• R&D Concentration
• IS/IT Cost Reduction and
Outsourcing
• Sales force efficiency
• Real Estate
Cost of Sales
• Manufacturing Outsourcing
• Local Cost of Sales
• Sourcing strategy &
organization
• Fact-based negotiations/
sourcing
• Product mix review
• Product rationalization
Cash Flow
• Joint Venture (Sony
Ericsson)
• Sales/leaseback
• Sold customer financing
stock
• DSO reduction (collection)
• Inventory reduction
• Capital restructuring
Applied Value
Involvement
20
IDEON Lund_2013-01-28
Lean Growth 3 Ways
My background
The Jan Stenbeck principles
The Applied Value Group
Lean Growth I – large companies (Ericsson)
Lean Growth – our philosophy
Lean Growth III – micro enterprises (Hand in Hand)
Lean Growth II – small companies (Robust Steel Doors)
Agenda – Lean Growth 3 ways:
21
IDEON Lund_2013-01-28
Lean Growth 3 Ways
Robust Steel Doors processes input materials to steel doors and
markets the products under own brands.
Robust Value Chain
Input materials
(e.g. steel sheets,
locks, isolating
material)
Manufacturing
(Nykroppa)
Robust Ståldörrar AB
Distribution
(Direct, Wholesaler,
Installation,
Construction)
End-customer
(Multi-dwellings,
Offices, Industries)
Direct sales
Installation
Wholesaler
Construction
Multi-dwellings and Offices
22
IDEON Lund_2013-01-28
Lean Growth 3 Ways
Robust Steel door has since AVG acquired the company increased
runrate (end 2012) turnover with 37% and multiplied EBIT with 31X.
6%
7%
3%
1%
1%
3%
14%
21%
26%
36%
38%
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
0
50
100
150
200
250
2005 2006 2007 2008 2009 2010 2011 2012 Runrate
end of
2012
2013 2014
Turnover EBIT%
MSEK EBIT%
AVG acquires
Robust Nov
2008
Avoid
bankruptcy
23
IDEON Lund_2013-01-28
Lean Growth 3 Ways
Fixed cost yields savings of 7 MSEK or 7% in EBIT improvement.
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Fixed cost actions EBIT impact 2011 to 2014
24
IDEON Lund_2013-01-28
Lean Growth 3 Ways
Variable cost actions yield +20% in gross margin improvement.
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Variable cost actions EBIT impact 2011 to 2014
25
IDEON Lund_2013-01-28
Lean Growth 3 Ways
Reduced fixed cost and improved gross margin make added sales
highly profitable.
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