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Number 13

Mercer Management Journal

The Value Growth Agenda

Setting the agenda

Finding the right drivers of value growth
With so many options, which initiatives really matter?

By Ted Moser and Hanna Moukanas

As growth opportunities have become more dynamic and transitory,
the traditional pillars of strategy have been rendered obsolete.
Senior managers need a short, coherent list of initiatives to mobilize
the organization, tell outside stakeholders where the company
is headed, and reach the next profit zone before it shifts again.

5 Assembling the components of business design

11 Thought questions
Finding the right drivers of value growth
With so many options, which initiatives really matter?

By Ted Moser and Hanna Moukanas

E very firm needs an effective value growth agenda, but not all firms have one. How else to
explain the extraordinary number of great firms with strong brands, fine products, and great
people that have struggled in recent years: Compaq, British Telecom, Procter & Gamble, and
Xerox, to name just a few (Exhibit 1)?

A high-impact value growth agenda is more than the “initiative du jour.” It’s a prioritized short
list of actions designed to enable a firm to meet or exceed its own value growth targets and
the expectations of investors. It separates the essential “must dos” from the longer list of
“should dos.” The agenda often combines a mix of significant operational improvements with
focused fundamental change. It should be tirelessly communicated to all members of a com-
pany’s value growth coalition: customers, employees, suppliers, and investors. And since the
company’s chosen profit zone is a moving target, the agenda needs to evolve over time.

But a value growth agenda only succeeds when it focuses on the right growth levers, at the
right time, and in the right sequence. And the company must execute it effectively. Take
Compaq, for example. At its inception in 1982, Compaq’s “IBM killer” value growth agenda was
perfect in focus, in sequence, on time, and flawlessly implemented. Compaq determined it
could produce the highest performing PCs with surprisingly low prices, thanks to strong engi-

Exhibit 1 Market value collapse

Compaq British Telecom Procter & Gamble Xerox

90 180 160 45
80 160 40
70 140 35
60 120 30
$ billions

50 100 25
40 80 20
30 60 15
20 40 40 10
10 20 20 5
0 0 0 0
1997 1999 2001 1997 1999 2001 1997 1999 2001 1997 1999 2001
- 63% - 66% - 46% - 85%
MV decline MV decline MV decline MV decline
from peak from peak from peak from peak

Note: Data is for April 1997 through April 2001. Source: Mercer Value Growth Database

Ted Moser and Hanna Moukanas are vice presidents of Mercer Management Consulting.
Moser is based in San Francisco and Moukanas is based in Paris.

Mercer Management Journal Setting the agenda 1

neering competence, a low-cost manufacturing culture, a dedicated PC focus, and (ultimately)
market share leadership. Compaq became an entrepreneurial star, breaking the business
world’s record for the fastest “zero to $1 billion” annual sales ramp-up in just five years.

Yet Compaq’s value growth agenda didn’t anticipate and evolve fast enough to capture the next
several profit shifts in the PC market. Value was migrating to made-to-order PCs (Dell), to serv-
ices-led computing solutions (IBM Global Services), and to enterprise computing (Sun, IBM).
Only after allowing competitors to gain value at its expense did Compaq’s agenda change—and
then in all three directions at once. In 1998, within the space of ten months, Compaq rolled out
a variant of Dell’s distribution system, created a solutions sales force via the acquisition of DEC,
and started an enterprise server product line using DEC’s Alpha chip design. So much agenda
change in so little time starting so late created huge implementation challenges and failed to
drive a turnaround in value growth.

Today’s most successful companies use a high-impact value growth agenda to keep pace with
or to stay one step ahead of Value Migration®1, the process by which value growth opportunities
shift within and across sectors. Today, General Electric’s agenda is defined as “Globalization,
Services, Six-Sigma Quality, and e-Business.” And its agenda has evolved over time. From the
famous “Be #1 or #2 or get out” market leader initiative in the early 1980s, through the “Work-Out”
program to enhance efficiency in the late 1980s, through the solutions and services efforts of the
1990s, GE’s internal rate of change has kept pace with the market. Every GE manager and supply
partner knows these priorities and follows them. Investors, knowing and believing too, have
rewarded the company with exceptional value growth.

Value Migration changes the rules of the game

Just twenty years ago, most companies had less need for such a dynamic agenda. A company
was defined by what it produced, and everyone knew what it did. Nippon Steel, U.S. Steel, and
Usinor made steel. General Motors, Volkswagen, and Toyota made cars. BT, NTT, and AT&T
ran national telephone services.

Exhibit 2 Traditional value Companies also competed in similar ways, typical-

growth management ly relying on the same few levers to increase the
value of the firm. Winning strategies started with
customer purc a twin focus on product innovation to achieve dif-
ble ha
ofita se
s ferentiation and cost reduction to maximize mar-
gins. Market share was the strongest underlying
value driver, as it led to scale economies in areas
Market Product
share portfolio
such as R&D and branding and a low-cost position
strategy managment that preserved profit margins as an industry
competence matured and prices declined.
Product Cost
innovation reduction Managing the product portfolio for market share
and choosing new markets in line with internal
core competencies ensured sustained value
growth. A mostly silent partner in this approach
was the customer (Exhibit 2).

2 Setting the agenda Mercer Management Journal

Exhibit 3 High revenues and market share no longer guarantee high profit.

Aerospace 2000 Chemicals 2000

20 30
Textron Hercules
Return on sales (%)

15 United Technologies

Return on sales (%)

General 20 IMC Global DuPont
10 Lockheed Martin Boeing Dow Chemical

0 0
0 10 20 30 40 50 60 0 5 10 15 20 25 30 35
Revenue ($ billions) Revenue ($ billions)
Source: Mercer Value Growth Database

An agenda centered on market share served business leaders well for decades, but it no longer
guarantees sustained value growth, for several reasons:

TSome scale positions have lost their uniqueness. Multiple competitors in global markets have
achieved adequate scale. Outsourcing providers have emerged to provide scale effects to
smaller competitors. Mass markets have given way to segmented ones, and product-based
value propositions to propositions based on solutions and customer economics (Exhibit 3).

TIndustry boundaries have blurred, creating new competitors who attack from the blind side. Being
the leader in telephony networks doesn’t matter if customers want data networks. And for
many manufacturing applications, engineers consider the relative merits of metals, plas-
tics, and composites, suggesting a broader “materials” definition.

TCustomers have grown increasingly sophisticated, demanding, and diverse. The passive customer
has evolved into an active customer, seeking customized products and tailored solutions,
and wanting them promptly. With more options and more information on supplier econom-
ics, customers are armed and dangerous. Moreover, consolidation has made business cus-
tomers larger and more powerful. And the increasing heterogeneity of customers has creat-
ed huge incentives to build business designs precisely tailored to the priorities of economi-
cally attractive customer segments.

These changes have caused a dramatic increase in the rate and impact of Value Migration. With
the sources of competitive advantage having shifted from inside the enterprise to the marketplace
outside, the task of the business leader has grown exponentially more difficult. Business success
is now determined by how well a company anticipates these shifts and by the speed with which it
mounts a winning response before the window of opportunity closes. Add to this more complex
environment an unprecedented level of pressure on managers to instill investor confidence in
their company’s prospects, and the challenge of creating an effective value growth agenda
becomes fully evident.

Mercer Management Journal Setting the agenda 3

Finding the leverage

Every company’s value growth agenda can be developed and organized around five growth levers
(Exhibit 4). Which levers to pull and in which order naturally varies by situation. The levers include:

Exhibit 4 New value growth approach TBusiness design innovation. Some of the largest
value growth opportunities involve the creation
of entirely new business designs responding to
e Migration ®
Valu the emerging needs of key customer segments
es ur
r iti c e (see sidebar, “Assembling the components of


business design”). These new business designs


to m

Market share Product portfolio

may supplant, complement, or be only loosely


Portfolio related to the core business. The traditional
Organizational concern with market share remains important,
Customer Operational but subordinate. What makes sense is to maxi-
value growth breakthrough
mize the share of healthy business designs.
Product innovation Cost reduction The business design lever is particularly potent
when the future value growth potential of a
company’s core business has matured or when
an industry is undergoing some form of funda-
mental change.

TCustomer value growth. Significant opportunities can be tapped by optimizing a company’s

relationships with customers. In response to the fragmentation of the mass market and
the explosion of customer alternatives, the traditional focus on product innovation has
become part of an overall customer value lifecycle. Companies frequently have too many
of the wrong customers and too few of the right ones. Fine-tuning value propositions—
offer, brand, pricing, distribution, and the customer experience—can often attract more of
the most lucrative customers and change the economics of the rest. That can result in
huge financial rewards. Keeping value propositions in synch with the changing priorities
of customers through a test-and-learn culture can sustain these results.

T Operational breakthrough. The traditional focus on cost reduction has become part of an
overall operational breakthrough that optimizes cost, quality, time, and assets in the con-
text of the firm’s chosen value proposition. With business design lifecycles now increas-
ingly measured in years rather than decades, getting the operational side right can’t wait
without compromising the total return to investors. In addition, operations today can be a
huge differentiator, enabling customers and suppliers to link with the company in new
and powerful ways.

T Portfolio redesign. Significant value growth leverage can often be found through a recon-
ceptualization and redesign of a company's portfolio. Yet traditional portfolio approaches
are ill-suited to the modern business environment, as they focus on business units and
seek to optimize a company's assets based only on the single dimension of product mar-
ket share, using rear-view-mirror metrics.

Taking other dimensions into consideration can lead to enhanced insights and better deci-
sions. One such dimension is business design, which enables the clustering of business
units into a smaller number of underlying designs across which lessons can be shared. This

4 Setting the agenda Mercer Management Journal

Assembling the components of business design
customers. Profits may come from product sales
Customer selection Value capture/ or service charges, as well as a host of other
and value profit model
value-capture mechanisms such as financing
income and licensing fees.
Organizational (3) Scope refers to how the company defines its
activities and its product and service offerings.
The right scope lets a company focus on what it
Strategic control Scope does best while allowing others to handle activ-
ities they do better, since the company is likely
to realize less value from those activities. Dell
Computer focuses on marketing and assembling
(1) Customer selection defines the set of cus-
PCs and managing a complex supply network,
tomers the company chooses to serve, as well
leaving to other companies the work of physi-
as those it chooses not to serve. Like other ele-
cally producing computer components.
ments of business design, customer selection
may shift over time, sometimes dramatically: (4) Strategic control refers to the company’s abil-
IBM, for example, has emerged as a major sell- ity to protect its profit streams from being erod-
er of basic technology to computer manufac- ed by competitors (or even by powerful cus-
turers, turning former rivals into a new cus- tomers). It answers the questions, “Why should
tomer set. a customer buy from me? Why must a cus-
tomer buy from me?” It may take many forms,
Value propositions define the value that the
from ownership of patents without which a
company creates for customers. This may
particular technology can’t be built to control
include benefits derived from products, servic-
over customer relationships that determine
es, information, and other sources. The more
how buying decisions are made.
valuable—even unique—these benefits are,
the more reasons that customers have to buy (5) Finally, organizational architecture defines
from one company and no other. the management structures, corporate culture,
and talent leverage mechanisms that the compa-
(2) The profit model defines how the company
ny uses to execute its business design choices.c
gets rewarded for the value that it creates for

dimension incorporates the various types of customer relationships and profit models that
a company has. A second dimension is economic neighborhood, a concept that acknowl-
edges that traditionally defined industries are often parts of larger, more porous economic
landscapes. Mapping business designs across economic neighborhoods creates a broader
field upon which to see opportunities, threats, and potential moves.

T Organizational transformation. This is perhaps the most important lever of all, since the
organization is the mechanism that transforms strategy into value growth. Pull this lever
when a good strategy is being held back by the organization—dearth of a critical capabili-
ty, inconsistent incentive systems, inefficient processes, dysfunctional culture, or unclear
leadership—or pull it when the current business design must be completely reinvented
to capture the next wave of value growth.

Mercer Management Journal Setting the agenda 5

Other major sources of value can cut across all these levers. For instance, digital technologies
including the Internet can help companies address critical business issues by offering signifi-
cant productivity improvements as well as making possible entirely new business designs and
value propositions.

Playing by the new rules

Rarely are all five levers pulled simultaneously. Typically, at any given time, one or two levers
predominate in a firm’s agenda, but over time, its agenda will evolve to focus on other levers
in response to changing market conditions. In any company, there are more laudable initia-
tives than available time; thus, prioritization and sequencing are the core arts of establishing
a value growth agenda.

Although value growth agendas require intensive efforts, they are well worth it.
Two examples should help make this clearer.

Wal-Mart’s value growth agenda

Wal-Mart is one of the greatest value growth stories of all time. Starting in 1969 as a local
supermarket in Arkansas, the company has created over $200 billion in value for shareholders.
Between 1989 and 1998 alone, it represented nearly a quarter of the $726 billion in sharehold-
er value created in the retail industry.

There are four major phases in the evolution of Wal-Mart’s value growth agenda:

TCapturing “markets for one.” Sam Walton’s initial idea was as bold as it was simple. He
wanted to be the discount retailer for all of America’s small-to-medium-sized towns,
which can only support a single superstore. These “markets for one” conferred a natural
monopoly on the first retailer to the market. Walton aggressively built out a nationwide
chain to ensure that Wal-Mart would be there first. A brilliant business design innova-
tion, these stores remain a bedrock of the firm’s financial performance to this day.

TStreamlining operations through real-time logistics and decision management. For much of the
1980s and 1990s, Wal-Mart made significant technology investments in electronic data
interchange, the automation of distribution centers, and the implementation of satellite
systems to facilitate ordering, shipping, logistics, and communications. But what really
mattered was how fast Wal-Mart acted on that data. In the store, management focused
on capturing point-of-sale information and mining this data for insights. In addition,
they worked to transform their logistics relationships with suppliers. These initiatives
have helped Wal-Mart achieve an operational breakthrough—extraordinary growth with
increasing inventory turns and a competitively superior return on assets (Exhibit 5).

TExtending into new formats and product lines. By the mid-1980s, it became clear to Wal-Mart
that it had a huge value gap. Its stock valuation was not justified by the profit growth
potential of its core store formats, which was tapping out as U.S. markets approached
saturation. So the mid-1980s through the 1990s became a time of exceptional business
design innovation and experimentation for Wal-Mart. Its Sam’s Club format focused on
new customer segments such as small business owners and budget-oriented con-
sumers by delivering a focused assortment of bulk items in a warehouse club format.

6 Setting the agenda Mercer Management Journal

Exhibit 5 By streamlining operations, Wal-Mart improved inventory turns and ROA.

Inventory levels as % of sales Inventory turnover Return on assets

25% CAGR 8% 20%
1990-2000 Wal-Mart 3.8%
K Mart -2.1%
20 15
6 Target -1.0%

15 Wal-Mart -4.5% K Mart 2.6% Wal-Mart

10 Target -1.6% Target
5 K Mart
1990 '92 '94 '96 '98 '00
0 0
1990 '92 '94 '96 '98 '00 1990 '92 '94 '96 '98 '00 -5
Source: Mercer Value Growth Database

Its Wal-Mart Supercenters focused on new purchase occasions such as grocery shopping,
buying prescription drugs, and photo finishing. Management focused as well on interna-
tional expansion of culturally tailored versions of its successful U.S. business designs.

While the jury is still out on its international moves, Wal-Mart’s new formats effort has been a
huge success. In 1990, new formats represented less than 10 percent of Wal-Mart’s stores; by the
end of 2000, they represented over 50 percent.

TOrganizing for a consistent customer experience. In the early 1990s, Wal-Mart recognized that
its nearly one million workers represented both a huge risk and a huge opportunity. The
question was how to maintain a consistent corporate culture and customer experience in
a low-wage industry with relatively unskilled labor and high turnover rates. The company
is working to achieve this organizational transformation in a number of ways, including:

- establishing rules of customer engagement such as the friendly greeter at every entrance
and the “ten-foot rule” that ensures that an associate acknowledges the presence of any
customer who comes within a ten-foot radius

- offering both incentive compensation to reward initiative and a healthy benefits package
to strengthen the basic employment relationship

- sending senior management into the field every week to talk with store managers,
associates, and customers

Through such procedures, Wal-Mart has earned the cooperation of its associates and
has engaged their emotional energy.

Sustaining this exceptional performance (Exhibit 6) will be a challenge. Enhancing the interna-
tional business and leveraging the Internet should both figure prominently in Wal-Mart’s next
agenda. The company is already at work on a number of Internet initiatives, both customer-facing
( and supplier-facing. As Wal-Mart’s e-commerce moves have disappointed to date,
the firm may have to make a big e-commerce acquisition as part of defining the next agenda.

Mercer Management Journal Setting the agenda 7

Exhibit 6 Wal-Mart’s evolving agenda

2 1. 1980s-mid-1990s (1981-2001)
Business Streamline logistics, distribution, and supplier network
Wal-Mart 30%
design Portfolio
innovation redesign 2. Mid-1980s-mid-1990s
3 Pioneer new formats and product lines
1 3. 1990s
Deliver a consistent customer experience
Customer Operational
$ billions

value growth breakthrough


Target 18%

Kmart 3%
1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001
Note: Q1 1981- Q1 2001
Source: Mercer Value Growth Database

LVMH’s value growth agenda

LVMH, the leading global purveyor of luxury goods, has created more than $25 billion in sharehold-
er value in the past ten years by artfully initiating three important shifts in its value growth
agenda (Exhibit 7):

TIndustrializing the luxury branded experience. LVMH recognized that the value growth potential
of the classic “boutique” business model was inherently limited. Starting in the early 1990s
under the leadership of Bernard Arnault, LVMH invested heavily in advertising and in open-
ing more and larger stores across which to amortize its brand investments. From the begin-
ning, the strategy was based on moving beyond the traditional carriage trade to capture
more aspirational customers. That move took high-end brands to what approached a mass
market, without diluting their cachet. The focus on brand has continued as the company
has expanded. Some brands were moved up-market (such as Veuve Clicquot), others
extended (Dior’s move into high-end fragrances), and yet others energized with new talent
(Givenchy’s hiring of designer Alexander McQueen in 1996).

TCornerstoning to capture a greater share of wallet. Wanting to capture a greater share of

the target customer’s luxury goods spending, starting in the mid-1990s, the company
embarked on a major expansion along three dimensions. First, it reinforced the core port-
folio of brands in fashion, leather goods, fragrances, cosmetics, wine, and spirits with key
acquisitions (Marc Jacobs) and alliances (Prada). Second, it moved into multi-brand retail
(Duty Free Shops and the fragrance and cosmetics superstore Sephora). And third, it
expanded into adjacent economic neighborhoods (watches and jewelry). Through these
portfolio redesign moves, LVMH has captured the leading position in terms of total operat-
ing profit in three of its sectors (leather goods, specialty retailing, and wines and spirits)
and the number three position in two others.

8 Setting the agenda Mercer Management Journal

Exhibit 7 LVMH’s evolving agenda

1. 1990s
1, 3 Industrialize the luxury branded experience
Business 2
design Portfolio
2. Mid-1990s
40 innovation redesign
Cornerstone into adjacent economic CAGR
neighborhoods (1990-2000)
$ billions

transformation 3. 1997 LVMH 13%

30 1 Integrate to control distribution
Customer Operational channels
value growth breakthrough
Seagram 10%

Gucci 23%*
Hermes 22%*
Brown-Forman 7%
1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001
*Gucci CAGR is 1996-2000; Hermes CAGR is 1994-2000.
Source: Mercer Value Growth Database

TIntegrating to control distribution channels. Starting in 1997, LVMH embarked on another

business design innovation: to solidify its brand positions by increasing both its num-
ber of outlets and its level of control over brand imaging at retail. Beginning with the
rapid expansion of its flagship boutique stores (Louis Vuitton, Celine, and Loewe),
and continuing with its acquisition of Duty Free Stores to provide access to both Asian
markets and a new travel-related purchase occasion, the company has moved aggres-
sively to be where its high-end customers are. Recent moves into mass retailing, such
as its acquisition and expansion of Sephora, and into the Internet space through, provide LVMH with retail control over a significant portion of its product
sales and ensure a great customer experience. Contrast these moves with several other
fashion houses that chose to mass license their brands, only to see the value of those
brands diluted a short time later.

Setting and communicating the agenda

Wal-Mart and LVMH could have made other choices. Each company was and remains confronted
with a huge spectrum of strategic options. But each chose to focus the limited financial, physical,
and emotional energies of their organizations on a few key initiatives that mattered—transforming
a small town supermarket into a chain of superstores, then a retail occasion phenomenon, and a
luxury retailer into a portfolio of powerful brands. And they renewed this agenda as new opportu-
nities and threats arose, thereby delivering sustained and superior economic performance.

Setting the right course is hard. Montgomery Ward and Kmart had access to the same data and
made vastly different and less effective choices in discount retail. And in the fashion space, The
Limited could have taken a similar approach to that of LVMH for The Limited’s own mid-market
customer, but didn’t.

Mercer Management Journal Setting the agenda 9

While setting and renewing a value growth agenda is not easy, the benefits clearly justify
investing time in its development. There are four key steps in establishing an agenda:

T Identify and assess the impact of Value Migration patterns in economic neighborhoods served.
In order to develop an accurate assessment of the value growth potential of an enter-
prise, it’s crucial to have a clear perspective on where tomorrow’s profit zones will
emerge in all economic neighborhoods served or potentially served. An evaluation of
which Value Migration patterns3 are likely to play out is often the best way to create a
shared vision of future competitive dynamics, threats, and opportunities for the business
designs the company currently operates.

TEvaluate the value growth potential of current initiatives. It’s critical to assess the value
growth potential of all current initiatives in light of the management team’s shared
insights into future sources of value. Inevitably, some initiatives will see their potential
soar, while others plummet. Comparing the net value growth potential of all initiatives
with the enterprise’s stated value growth goals will identify the value gap, if any, that
the organization must address.

TDevelop new growth hypotheses. Whether or not a value gap exists, management should
hypothesize which new moves—from redesigning the portfolio to creating an innovative
business design, achieving operational breakthrough, or building a better customer value
growth system—will move the company from strategic disadvantage to strategic advan-
tage. Then they should estimate the value growth potential of each significant hypothesis.

T Define the value growth agenda. Armed with a menu of potential moves and their potential
value impact, the agenda-setting process begins. What combination of initiatives—
whether focused on reinvention or operational improvement—in what sequence over
what timeframe maximizes the firm’s value growth within the constraints of executive
attention and capital availability?

Once the agenda has been set, the truly hard job begins. Responsibilities and deadlines must be
established. The value growth agenda must be led from the top. And it must be communicated
early and often to employees, investors, customers, and suppliers. In time, it will become the DNA
of the company and direct a creative organization toward great results. Suppliers and customers
who buy into the agenda will respond more positively and help the firm succeed. Investors who
understand it will support the share price, maintain lines of credit, and resist demands for hasty,
shortsighted moves in an economic downturn or after a bad quarter.

The value growth agenda must remain attuned to the marketplace and thus needs to be renewed
periodically. Changing market conditions—whether macroeconomic, such as an economic downturn;
technological, such as the emergence of the Internet; customer-oriented, such as the emergence of
a new segment; or competitive, such as the identification of a new competitor on the edge of the
radar screen—will call for a review, as will the initial signs of Value Migration that threaten the
current business design.

Creating value is easier in good economic times as a rising tide lifts all boats. But with slowing
macroeconomic growth, a value growth agenda based on real strategic insight, on time, in the
right sequence, and flawlessly executed will be a competitive necessity. Times like this represent
a great opportunity. While rivals struggle to regroup, great companies mobilize, disrupt the
rhythm of competition, and seize control of their markets.c

10 Setting the agenda Mercer Management Journal

As you consider building your own Value Growth Agenda,
ask yourself the following questions:

Competitive position Patterns and trends Growth strategy Growth strategy

development communication

T Is our market value T Do we regularly T Are our strategic T Do employees and

growing as fast as it track changing goals and financial managers have a
could? customer targets ambitious clear understanding
and technology enough? of our growth
T Do investors value trends, emerging strategy?
our company fairly? patterns, or new T Do senior managers
regulations in the dedicate time to T Are they excited
T Are we as profitable industry? think about and and motivated by
as our toughest develop new growth that strategy?
competitors? T How is our business opportunities?
threatened by these T Are we clearly
T Are we meeting our changes? T Do we have a clear communicating
revenue and earn- set of initiatives to the strategy to
ings growth targets? T How are new improve our current investors?
entrants redefining businesses?
T Have we created the traditional rules T Are investors
barriers to entry for of success in our T Do we have an confident in our
new entrants in our industry? attractive set of ability to grow?
industry? growth ideas to
T Is our competitive develop future
T Can we pinpoint “radar screen” businesses?
why customers tracking new,
choose us over digitally enabled T Is our growth
our competitors? players? strategy driven
by customer priori-
T How are the tradi- ties rather than
tional boundaries by internal core
of our industry competencies?
T Do we know which
growth initiatives
will create value
beyond what ana-
lysts have already
factored into our
market value?

T Do we have realistic
and action-oriented
plans to realize
these growth initia-

Mercer Management Journal Setting the agenda 11

Mercer Management Journal

Editorial Board Director of Publications

James W. Down John Campbell
Charles Hoban
Nancy Lotane Art Director
Joseph Martha Michael Tveskov
David J. Morrison
Ted Moser Digital Edition Team
Hanna Moukanas Ellen M. Zanino
Patrick A. Pollino Christopher Hogan
Phyllis Rothschild Jamie Klickstein
Adrian J. Slywotzky

Mercer Management Journal is published by Mercer Management Consulting for its clients and friends.
The contents are copyright 2001 and 2002© by Mercer Management Consulting.

Value Migration® is a proprietary trademark of Mercer Management Consulting that has

been registered with the U.S. Patent and Trademark Office. NexperimentTM is a trademark;
Strategic Choice Analysis® is a registered trademark; Value Net DesignSM is a service mark;
and ChoiceboardSM is a service mark; all owned by Mercer Management Consulting.

Cover illustration by Patrick Corrigan.

All rights reserved. Excerpts can be reprinted with attribution to Mercer Management Consulting.
Articles can be found on our Web site:

For information on reprinting entire articles and all other correspondence, please contact the editor:

John Campbell
Mercer Management Consulting
33 Hayden Avenue
Lexington, Massachusetts 02421
About Mercer Management Consulting

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1375 East Ninth Street, Suite 2500 Paseo de la Castellana, 13-2º piso Kangnam-ku
Cleveland, Ohio 44114 28046 Madrid Seoul, 135-935
216 830 8100 34/ 91 531 79 00 82/ 2 3466 3100
216 830 8101 fax 34/ 91 531 79 09 fax 82/ 2 3466 3105 fax

Dallas Mexico City Toronto

3500 Texas Commerce Tower Paseo de Tamarindos 400-B BCE Place
2200 Ross Avenue Piso 10, Bosques de las Lomas 161 Bay Street, P.O. Box 501
Dallas, Texas 75201 05120 D.F. Toronto, Ontario M5J 2S5
214 758 1880 52/ 55-5081 9000 416 868 2200
214 758 1881 fax 52/ 55-5258 0186 fax 416 868 2208 fax

Frankfurt Montréal Zurich

Friedrichstr. 2-6 600, boul. de Maisonneuve Ouest Tessinerplatz 5
D-60323 Frankfurt 14e étage CH-8027 Zurich
49/ 69 17 00 83 0 Montréal, Québec H3A 3J2 41/ 1 208 77 77
49/ 69 17 00 83 33 fax 1/ 514 499 0461 41/ 1 208 70 00 fax
1/ 514 499 0475 fax
Stefan-George-Ring 2
81929 München
49/ 89 939 49 0
49/ 89 930 38 49 fax