By focusing on the vital few elements of its value proposition, an established technology company was returned to sustainable, profitable growth.
A well-established technology company had hit a soft-spot in its growth trajectory – with poor profitability and weak cash flow following closely behind. Though not at crisis levels, the company needed to quickly reassess its position, to define the factors behind the decline in performance, and to develop a path to sustainable growth. We worked directly with CEO, CFO, and Business Unit Heads to navigate the challenge by strategically evaluating and prioritizing the most promising service offerings, market segments, and clients. With that clarity, we could organize the company around the activities that provided the most value to the firm’s customers and the best return on investment for scarce capital.
Our approach centered on a quick diagnostic of contribution margins by product, by customer segment, and by market segment which identified where the sales weakness was coming from and (while another of our teams worked simultaneously with sales, marketing, and operations to address the value proposition refresh) the strategy team illustrated the segments of the company that were working well – and the would grow even faster when resources were freed-up from persistently lagging areas.
Approach
The team could use existing data within the company’s reporting systems to break down profitability and contribution margin to the product level (Product Line Profitability). This was a new view for management and proved a catalyst for fundamental change. This also allowed Management to see how and where profits resided – and with the stark challenge from some legacy product offerings and long-term ‘house accounts’ which were actually running at a loss (when fully burdened with appropriate cost).
Result
Top-line growth improved from zero to 10%+ within a year. Margins, ROI, and ROE were also impacted to such an extent that the firm could opportunistically refinance its debt facilities and to raise growth equity investments.
