Portfolio Analysis

Portfolio Analysis

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  Portfolio Analysis atPitney Bowes Ben Yemini Director, Corporate Strategy September 29th, 2012 This document is for academic discussion purposes only. It is an incomplete record of the conversation. Data contained herein has been disguised. This material does not contain any Pitney Bowes official statements of fact or intent.
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  Pitney Bowes History 1902: Arthur Pitney patents his postage-stamping machine 1920: Pitney's American Postage Meter Co. and Walter Bowes's Universal Stamping Machine Co. merge to form Pitney Bowes 1957: Faces government anti-trust suit, forced to license technology to others 1979: Acquires Dictaphone Corp. 1982: Enters fax machine market 1995: Sells Dictaphone and Monarch subsidiaries 2001: Spins off fax and copier division as Imagistics International 2001-’08: Completes 92 acquisitions including mainly in Software and Services 2008-’10: USPS First Class Mail decline rate increases from -2%/yr. (2001-’08) to -7%yr. (2009-’10) PB Revenue declines by $800M EBIT margin declines from 24% to 16% 2009 -‘11: Strategic Transformation initiative Portrait Software acquired in 2010 2
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  Company Vision We helpSMB and Enterprise businesses optimize their communications, transactions & interactions with their customers, prospects and partners to enable business growth. Customers Prospects Partners Communications Solutions for preparing, delivering and responding to business communications Process Optimizing internal business processes related to Optimization connections Transactions Solutions for executing and processing transactions Customer Insight Customer and prospect profiling and response analysis Every Connection is a New Opportunity TM 3
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  Objectives of PortfolioManagement • Actively manage our portfolio to leverage our resources most effectively and maximize value creation for our shareholders • Key Considerations: – How is our current portfolio positioned today? – Given the market outlook, how do we expect our businesses to perform in the future? – How should resources (e.g. R&D, Sales & Marketing) be allocated? 44
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  Portfolio Management Framework ENHANCE PROFITABILITY INVEST TO GROW 1 • Maximize cash flow • Prioritize over businesses in other • Invest in technology to improve quadrants for investments productivity • Exit sub-segments with poor prospects 2 Profitability 3 REDUCE COST & SCRUTINIZE GROW & IMPROVE PROFITABILITY • Prioritize achieving acceptable • Allow growth investments only when profitability scale drives profitability 4 • Divest/Exit, if underperformance persists • Move businesses up into “Invest to Grow” or left to “Reduce Cost” quadrants based on performance to plan. 5 1 2 3 4 5 Strategic alignment and market attractiveness 55
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  Approach to PortfolioAnalysis • Define the portfolio “bubbles” – Identify Business Unit segments for our core business – Identify growth segments • Assess each core and growth bubble based on consistent relative criteria – Profitability – Strategic Fit – Market Attractiveness • Determine likely trajectory of bubble • Provide assessment to GMs as input to their 3 year strategic plan and 1 year budget submission 66
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  Portfolio Assessment CoreCriteria Profitability Criteria • EBIT Margin • Relative Performance EBIT Margin vs. Peers % Strategic Alignment Criteria Market Attractiveness Criteria • Leverage Core Assets • Industry Growth • Trans. & Innovation • Industry Profitability • Growth Beyond Core • Addressable Market • LOB Growth • Relative Market Share • Sustain Profitability • Position vs. Market Forces 77
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  Portfolio Assessment GrowthCriteria Profitability Criteria • NPV (5 YR) • EBIT Margin (YR 3) • Cannibalization Strategic Alignment Criteria Market Attractiveness Criteria • Alignment with CCM • Industry Growth • Alignment with BU Strategy • Industry Profitability • Leverage of core assets • Addressable Market • Executability • Market Establishment Risk • Ability to be a disruptor • Susceptibility to Secular Change 88
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  What I’ve Learned • Connecting strategy and budget requires persistence • Not ending up in the top right is okay • Invest in fewer, bigger strategic bubbles • Customer needs should govern bubble definition • Overinvest in risk assessment for growth bubbles 99