Growth Team Membership:2011 Corporate Strategy and Corporate Development Priorities Survey Results

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growth team m e m b e rs h i p™

2011 Corporate Strategy and Corporate Development Priorities Survey Results

Americas and Europe

Executive Summary . . . . . . . . . . . . . . . . . . . . . . . . 2What is the Growth Team Membership™ . . . . . . 3Survey Purpose and Respondents . . . . . . . . . . . . . 4

Corporate Development—Change Management and M&A Activities . . . . . . . . . . . . . . . . . . . . . . . 23

Respondent Demographics . . . . . . . . . . . . . . . . . 32

External Factors Shaping Corporate Strategy and Corporate Development’s Plans . . . . . . . . . . 5

Key Corporate Strategy Challenges . . . . . . . . . . . 8

Corporate Strategy—Effectiveness and Corporate Culture . . . . . . . . . . . . . . . . . . . . . . . 12

Key Corporate Development Challenges . . . . . . 19

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2011 marketing prioritiesgrowth team m e m b e rs h i p™

Source: Growth Team Membership™ research.

corporate strategy

corporate development

Key Internal Challenge Internal Challenge Root CauseThe challenge is developing effective strategy implementation plans

The root cause of the challenges is insufficient personnel and ineffective processes

Key Internal Challenge Internal Challenge Root CauseThe challenge is creating a determining model to guide the go/no-go decision on acquisition targets

The root cause of the challenge is ineffective processes

Resources Corporate Culture Strategic Planning2011 budgets and staffing levels will remain constant

“Fostering cooperation and trust” is the most popular description of a company’s corporate culture

Ensuring a strategy is flexible is the key cultural concern respondents take into account during strategic planning

Executive Summary

ResourcesM&A Integration and Change Management

Employee Retention

2011 budgets and staffing levels will remain constant

The primary change management challenge is establishing and managing employee expectations

The key tactic in retaining critical employees during an acquisition is early identification

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What is the Growth Team Membership™?

The Growth Team Membership™ (GTM) is a subscription program that supports executives within the functions reporting to the CEO.

GTM provides best practices, events, and services to enable executives to address internal challenges within their companies.

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Corporate Development

Email us [email protected] Visit us online www.gtm.frost.com

CEO’s Growth Team™ GTM: Creating Client Value

GTM’s case-based best practices help executives:

Speed the design and implementation of initiatives by not reinventing the wheel

Save money and reduce risk by avoiding mistakes made by other companies

Accelerate problem solving with a cross-industry perspective

Improve their function/company’s performance and productivity

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Survey Purpose and Respondents

Survey PopulationMethodologyResearch Objective

To understand the most pressing external and internal challenges shaping corporate strategy and corporate development executives’ 2011 planning .

Web-based survey platform Target respondents were Manager level and above corporate strategy and corporate development executives from companies throughout Europe and the Americas .

62survey

respondents

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External Factors Shaping Corporate Strategy and Corporate Development’s Plans

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2011 planning for corporate strategy and corporate development is heavily influenced by opportunities in new markets and navigating product commoditization challenges

Top Three External Factors

Survey Question: Please specify the Top Three external factors shaping your corporate strategy and corporate development plans in 2011 .

External Factor 1 Emerging global markets (29%)

External Factor 2 Need for product and service innovation (16%)

External Factor 3 Product commoditization pressures (11%)

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Challenges for Corporate Strategy and Corporate Development

Product commoditization pressures (100%)

External Factors Impact on Corporate Strategy and Corporate Development

Survey Question: Please indicate if the following factors present a challenge or an opportunity for your 2011 strategy .

Opportunities for Corporate Strategy and Corporate Development

Emerging global markets (94%)

Need for product and service innovation (100%)

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Key Corporate Strategy Challenges

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Top Three Corporate Strategy Challenges

Developing effective strategy implementation plans

Challenge 1

Driving strategy implementation through top-down and bottom-up engagement

Challenge 3

Aligning financial and strategic objectives

Challenge 2

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Challenge 1 Developing effective strategy implementation plans (26%)

Challenge 2 Aligning financial and strategic objectives (14%)

Challenge 3 Driving strategy implementation through top-down and bottom-up engagement (23%)

Challenge 4 Managing and implementing a global business strategy (12%)

Challenge 5 Conducting effective strategic scenario planning (19%)

Corporate strategists are struggling to develop and implement effective plans

Top Five Key Corporate Strategy Challenges

Survey Question: Please indicate the top five functional challenges shaping your corporate strategy plans in 2011 .

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Challenge 1Developing effective strategy implementation plans

Strategic Alignment: Lack of common objectives (30%)

Challenge 2Aligning financial and strategic objectives

Process: Ineffective process (40%)

Challenge 3Driving strategy implementation through top-down and bottom-up engagement


Challenge 4Managing and implementing a global business strategy

Staff: Limited resources (50%)

Challenge 5Conducting effective strategic scenario planning


Ineffective process and insufficient staffing are cited as the principal root causes of corporate strategy’s challenges

Survey Question: Please indicate if the root cause of your top five functional challenges are—staff, process, technology/systems, or strategic alignment .

Root Cause of Top Five Corporate Strategy ChallengesTop Five Corporate Strategy Challenges

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Corporate Strategy—Effectiveness and Corporate Culture

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Corporate Strategy Effectiveness and Corporate Culture Snapshot

Respondents rank their corporate strategy function’s effectiveness as “Average”

The most common descriptor of companies’ corporate culture is “fostering cooperation and trust”

Ensuring a strategy is flexible is the key cultural concern respondents take into account during strategic planning

Respondents expect staffing levels to stay the same in 2011

Respondents expect corporate strategy budgets to stay the same in 2011

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8% 11%

56%

25%

The majority of strategists rank their function’s effectiveness as “Average”

Corporate Strategy’s View of Its Effectiveness

Survey Question: Please assess the overall effectiveness of your corporate strategy function compared to those in other firms within your industry .

Above Average

Exceptional Below Average

Average

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Characteristic 1 Fosters cooperation and trust (43%)

Characteristic 2 Emphasizes employee engagement (43%)

Characteristic 3 Encourages corporate strategy implementation (38%)

Characteristic 4 Stimulates innovation (30%)

Characteristic 5 Enables decision-making ability at all levels [not just upper management] (21%)

Corporate strategists indicate a collaborative environment and widespread engagement are the lynchpins of their company’s culture

Top Five Company Culture Characteristics

Survey Question: Which of the following accurately describes the corporate culture within your organization (check all that apply)?

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Strategic planning is typically the preserve of senior management

Communication and Employee Engagement

Survey Question: Which of the following best describes the level of communication and employee engagement in your company’s strategic planning?

Mid-level managers work with senior management on strategy

Strategy planning is not a regular part of cyclical business operations

Feedback from all employees is included in planning

Only senior management is involved in strategy planning

Unsure about my company’s approach

0% 20% 40%

14%

31%

33%

19%

3%

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Factor 1 Choosing a strategy that is flexible and allows for revisions when needed (38%)

Factor 2 Developing communication processes to build buy-in and inform employees of change (23%)

Factor 3 Facilitating a companywide understanding and adoption of objectives (18%)

Factor 4 Aligning corporate strategy with corporate culture (18%)

To accommodate corporate culture, strategic plans need to be easily revisable

Top Four Cultural Factors Implemented in Strategic Planning

Survey Question: Please indicate which of the following cultural factors your company takes into account when conducting its strategic planning (check all that apply):

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52%

32%

16%

51%

14%

3%

32%

The majority of strategists indicate no change in 2011 staffing levels or budgets

2011 vs . 2010 Staffing and Budget Plans

Survey Question: In comparison to 2010, your 2011 corporate strategy staff will:

Staffing

Budget

Stay the Same

Decrease Moderately

Increase Moderately

Stay the Same

Decrease Moderately Increase Substantially

Increase Moderately

19




Key Corporate Development Challenges

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Top Three Corporate Development Challenges

Creating an objective method for reviewing potential acquisition/projects and formulating a go/no-go decision

Challenge 1

Developing a system for identifying capability gaps where strategic partners are either necessary or beneficial

Challenge 3

Identifying promising new targets before competitors

Challenge 2

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Challenge 1 Creating an objective method for reviewing potential acquisition/projects and formulating a go/no-go decision (18%)

Challenge 2 Identifying promising new targets before competitors (19%)

Challenge 3 Developing a system for identifying capability gaps where strategic partners are either necessary or beneficial (33%)

Challenge 4 Identifying the appropriate level of integration for an acquisition (20%)

Challenge 5 Creating a process to systematically assess the strategic fit of businesses in the corporate portfolio (15%)

Corporate development executives’ major challenges focus on M&A activities and determining where strategic partners can boost capabilities

Top Five Key Corporate Development Challenges

Survey Question: Please indicate the top five functional challenges shaping your corporate development planning in 2011 .

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Challenge 1Creating an objective method for reviewing potential acquisition/projects and formulating a go/no-go decision


Challenge 2Identifying promising new targets before competitors


Challenge 3Developing a system for identifying capability gaps where strategic partners are either necessary or beneficial

Process: Lack of process (40%)

Challenge 4Identifying the appropriate level of integration for an acquisition

Staff: Inadequate skills (34%)

Challenge 5Creating a process to systematically assess the strategic fit of businesses in the corporate portfolio


Corporate development’s top challenges are caused by ineffective processes and limited staffing

Survey Question: Please indicate if the root cause of your top five functional challenges are—staff, process, technology/systems, or strategic alignment .

Root Cause of Top Five Corporate Development ChallengesTop Five Corporate Development Challenges

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Corporate Development—Change Management and M&A Activities

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Corporate Development—Change Management and M&A Activities Snapshot

Respondents rank their corporate development function’s effectiveness as “Average”

The principal change management challenge in acquisition integration is establishing and managing employee expectations

The key tactic in retaining critical employees during an acquisition is identifying them early on

Respondents expect their staffing levels to stay the same in 2011

Respondents expect their corporate development budgets to stay the same in 2011

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13%7%

60%

20%

The majority of respondents rank their function’s effectiveness as “Average”

Corporate Development’s View of Its Effectiveness

Above Average

ExceptionalBelow Average

Average

Survey Question: Please assess the overall effectiveness of your corporate development function compared to those in other firms within your industry .

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The level of integration an acquisition requires is a function of the deal’s size and purpose

Level of Acquisition Integration

Survey Question: When integrating a new acquisition does your company tend to:

Take the best of both companies

Leave the acquisition

independent

Fully integrate the acquisition

Partially integrate the acquisition

Depends on the scale and purpose of the acquisition

0%

25%

50%

75%

30%

0% 0%

8%

62%

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Component 1 Company vision and corporate values (20%)

Component 2 Relationships with customers, partners, and communities (20%)

Component 3 Communication style—communication processes and employee engagement (8%)

Component 4 Involvement in decision making—decision hierarchy and employee feedback mechanisms (5%)

Component 5 Employee and supplier diversity (5%)

Cultural due diligence looks at target company vision and values as well as the nature of customer and partner relationships

Cultural Components Assessed in Due Diligence

Survey Question: Which of the following “cultural” components does your company assess in its M&A due diligence (click all that apply):

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0%

20%

40%

31%

8%

39%

23%

0%

The principal change management challenge in acquisition integration is establishing and managing employee expectations

Top Change Management Challenges During Integration

Managing differences in working styles

or leadership approaches

Navigating regional or national cultural

differences

Setting, communicating and managing employee

expectations

Retaining key employees

Aligning performance management systems, salary and incentive

compensation

Survey Question: Please indicate the most prominent change management challenge in your company’s acquisition integration:

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Tool 1 Early identification of key, core, and transitioning employees (20%)

Tool 2 Including compensation programs [retention bonuses, equity, earn outs, etc .] (15%)

Tool 3 Day one employee orientation to set expectations for the integration (12%)

Tool 4 Focusing on business continuity during the integration (12%)

The key tactic in retaining critical employees during an acquisition is identifying them early on

Top Change Management Tools for Employee Retention

Survey Question: Please indicate which of these change management tools your company uses to retain acquired staff (click all that apply):

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60%

40%

33%

53%

7%7%

The majority of corporate development executives expect 2011 budgets and staffing levels to remain constant

2011 vs . 2010 Staffing and Budget Plans

Survey Question: In comparison to 2010, your 2011 corporate development staff and budget will:

Staffing

Budget

Stay the Same

Increase Moderately

Stay the Same

Decrease Moderately

Decrease Substantially

Increase Moderately

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The Growth Team Membership™ (GTM) is an annual subscription program that supports executives in Marketing, Sales Leadership, Corporate Strategy, Corporate Development, R&D/Innovation, Market Research, and Competitive Intelligence . GTM offers best practices research, events, and services to address the internal challenges executives face . Contact us at GTMResearch@frost .com .

The Top Overarching Challenges Affecting Corporate Strategy and Corporate Development Executives

what’s keeping corporate strategy and corporate development executives up at night in 2011?

Corporate Strategy Overarching Challenges

Corporate Development Overarching Challenges

Sample Solutions from the Growth Team Membership

Strategy ImplementationStrategists are struggling with developing, implementing, and monitoring companywide initiatives—utilizing top-down, bottom-up engagement .

Learn how Dow Chemical used widespread early engagement, embedded representatives, and tracking metrics to rollout a sustainability business model .

M&A: Objective and Early Targeting

Corporate development executives need to accelerate their ability to identify and objectively evaluate potential acquisition targets .

Learn how our M&A toolkit increases the pace of acquisition go/no go decisions through sector/trend analysis and target-specific evaluations .

M&A: Change Management and Integration

Executives need to manage cultural misalignments and the change management aspects of post-acquisition integration .

Learn how Cisco includes cultural assessments in its due diligence, engages target employees to increase retention, and ensures an effective integration that stresses the deal’s value-drivers .

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Respondent Demographics

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Respondent Demographics

Survey Question: Please indicate the type of enterprise best represents your company .

N = 56

N = 55N = 56

Enterprise Type Business Model

Company Revenue

73%

23%

4%

51%

11%

38%

Public

Hybrid Company

Private

B-to-B Company

Venture Capital

0%

30%

60%

7% 7%

18%

36%

30%

Below $100 Million

$100 Million to $499.99 Million

$500 Million to $999.99 Million

$1 Billion to $11 Billion

More than $11 Billion

B-to-C Company

The majority of respondents work in B-to-B companies .

An overwhelming majority of the respondents work in a public company .

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Respondent Demographics: Top Six Participating Industries

Survey Question: Please indicate which industry categories best describe your company (check all that apply .)

N = 60

Energy and Power Systems

Electronics and Security

Information and Communication Technologies

Automotive and Transportation

Chemicals, Materials, and Food

Healthcare and Life Sciences

0% 10% 20%

17%

20%

17%

15%

15%

15%