David G. Thomson April 5, 2006 (913) , (408)

Transcription

1 Yet2.com David G. Thomson April 5, 2006 (913) , (408)

2 Yet2.com What is the success pattern of America s highest growth companies; those select companies that IPO d since 1980 and achieved $1B revenue? The first quantitative assessment of how high growth companies achieve success Identification of the financial pattern 7 Essentials supported by frameworks and in-depth interviews with Blueprint Company CEOs to discuss real world lessons and approaches

3 REVENUE GROWTH- THE MASSES VS BLUEPRINT COMPANIES $ Millions The Masses below $1B Revenue 250 Blueprint Companies 1,000 ILLUSTRATIVE EXAMPLES Years since founding Source: Standard & Poor s Compustat 2

4 GROWTH HAS TWO PARTS; VARIABLE TIME TO INFLECTION, 3 TRAJECTORIES TO $1B REVENUE Revenue $ Millions 1000 Cisco Budget Corp ebay ETrade King Pharmaceutical Google 4 years Nextel Express Scripts Microsoft Medimmune PeopleSoft Starbucks Adobe Dreyers Ice Cream Electronic Arts Fidelity Inv t Legg Mason Symantec 6 years 12 years Inflection point 0 Normalized Time(years) Source: Standard & Poor s Compustat, Blueprint analysis 3

5 SOFTWARE BLUEPRINT COMPANIES Revenue $ Millions 1000 Google BEA Oracle Siebel CA Veritas Verisign 4 years Microsoft CA PeopleSoft Sybase 6 years 12 years Adobe Electronic Arts Intuit BMC Software Symantec Inflection point 0 Normalized Time(years) Source: Standard & Poor s Compustat, Blueprint analysis 4

6 AVERAGE RETURNS OF EACH TRAJECTORY 4 year- 87%/year 6 year- 42%/year 12 year- 21%/year Revenue $ Millions years 6 years 12 years Source: Standard & Poor s Compustat, Blueprint analysis 5

7 BLUEPRINT COMPANIES ARE AMERICA S GROWTH ENGINE M $4,481B Growth Companies below $1B revenue and companies out of business Blueprint Companies 5 Number of Companies Number of Employees Market Capitalization Note: Year end All public companies who IPO since 1980 with revenue less than $1B at IPO Source: Standard and Poor s Compustat, Blueprint analysis 6

8 BLUEPRINT COMPANIES: FREQUENCY vs. MARKET VALUE Economic Sector Number of companies Market value ($B) Consumer Discretionary Information Technology Financials Health Care Industrials Materials Energy Consumer Staples Utilities Telecom Services

9 BLUEPRINT COMPANIES GRADUATE EVERY YEAR Number of companies/year who achieve $1B revenue Average = Source: Standard & Poor s Compustat, Blueprint analysis 8

10 7 ESSENTIALS TO ACHIEVE EXPONENTIAL GROWTH Create Create and and Sustain a Breakthrough Value Value Proposition Exploit Exploit a High High Growth Market Market Segment Marquee Customers Shape Shape the the Revenue Powerhouse Leverage Big Big Brothers to to Break Break into into New New Markets Become the the Masters of of Exponential Returns Management Team: Team: Inside Inside Outside Leadership Board: Board: Comprised of of Essentials Experts Five or more of the 7 Essentials showed in up in over 90% of Blueprint Companies Source: Blueprint analysis 9

11 THE ESSENTIALS TRIANGLE FRAMEWORK The 7 Essentials Breakthrough The Big Idea Breakthrough Value Proposition High Growth Market Segment Marquee Customers Execute exponential revenue growth Inflection Exponential Business Returns Big Brother Alliances Board of Essentials Experts Inside-Outside Leadership Achieve a business model of increasing returns 10

12 VALUE PROPOSITION PLATFORMS CREATE Shapers Of a New World Shapers of a new market Fill a critical gap Key characteristics Created new architectural element Secured Marquee Customers Scaled to segment dominance Filled and dominated critical gap Delivered best innovation to fill gap Focused on customers and alliances Example Oracle Microsoft ebay Genentech Broadcom BEA 11

13 VALUE PROPOSITION PLATFORMS - REDEFINE Shapers Of a New World Key characteristics Example Niche Shapers 2 nd but better Better value proposition price/performance First to fill market gaps then leap to major markets Aggressively captured unfair share Google Juniper Networks Fill a niche Started in niche market, moved to broader markets Alliances are critical channel to market Leveraged acquisitions to broaden product line Starbucks Nike Siebel 12

14 VALUE PROPOSITION PLATFORMS - OPTIMIZE Shapers Of a New World Key characteristics Example Niche Shapers Category Killers Out-executed through a combination of lower prices, enough quality and location Optimized supply chain JetBlue Staples Home Depot 13

15 2. EXPLOIT HIGH GROWTH MARKET SEGMENT TOP BLUEPRINT INDUSTRIES Industry Specialty Stores Property & Casualty Insurance Health Care Facilities Data Processing & Outsourced Services Health Care Services Regional Banks Apparel Retail Real Estate Investment Trusts Number of Blueprint Companies Source: Standard & Poor s Compustat, Blueprint analysis 14

16 BIG PICTURE: LESSONS FROM AMERICA S TOP MARKETS Most of the Blueprint Companies are growing in mature markets, not newer industries such as Internet Retail Top Blueprint Companies used best management practices and technologies to stay close to the customer Exponential revenue growth requires multiple product lines or service offerings Partnering with suppliers to lower cost for product delivery, but also product differentiation Import the talents and lessons from adjacent industries 15

17 3. ELEMENTS OF A MARQUEE CUSTOMER RELATIONSHIP Marquee Customer = Product Consumer X Test and deploy the product Large deployment Company Oracle Marquee Customer CIA Value Proposition Shaper X Lighthouse Reference Co-develop the value proposition in customer terms Serve as a reference Sell to peers become an extension of the sales force ebay Siebel Cisco Powersellers Charles Schwab Motorola 16

18 MARQUEE CUSTOMER LIFECYCLE REVENUE CISCO EXAMPLE $ Millions Source: Interviews 17

19 4. BIG BROTHER ALLIANCES Winner Big Brother Rationale ebay became the preferred auction partner to AOL Alliance 3 Year $75m deal IBM PCs enjoyed market leadership Microsoft licensed operating system Dominant workstation system Product bundling and distribution Microsoft gave Siebel additional market credibility Co-marketing on industry platform Source: Blueprint analysis 18

20 WIN WIN ASYMETRIC RELATIONSHIP EQUATION Big Brothers Innovation for emerging markets Fill critical gaps in portfolio Outsource specialized functions License brands we all realize for innovation and certain pieces of the portfolio we have to turn to someone else Little Brothers Access and scale into new markets Credibility with customers Access to partner s innovation and product line Market intelligence Customer demand Bottlenecks in current offerings Evolution and emergence of new webs or business ecosystems 19

21 5. BECOMING THE MASTERS OF EXPONENTIAL RETURNS FASTENAL A Different Hardware Business Market Value $ Million $ Million 1,000 4,000 Revenue 500 2,000 Earnings (EBIT) Source: Standard & Poor s Compustat, Blueprint analysis 20

22 HIGHEST VALUED BLUEPRINT INDUSTRIES Rank Industry Systems Software Internet Retail Biotechnology Specialized Finance Internet Software & Services Semiconductors Communications Equipment Application Software Health Care Equipment Diversified Metals & Mining Computer Storage & Peripherals Paper Products Computer Hardware Diversified Commercial Services Apparel Multi-Utilities & Unregulated Power Semiconductor Equipment Number of Companies Market Value/ Company ($M) 15,519 13,238 10,138 9,931 9,847 7,651 6,904 6,854 6,356 5,927 5,402 5,063 5,041 4,920 4,801 4,501 4,483 Source: Standard & Poor s Compustat, Blueprint analysis 21

23 IN CONSTRAST, BLUEPRINT COMPANIES CONSISTENTLY DELIVERED POSITIVE CASH FLOW... $ Millions Sustainable gross margins Gross Margin (percent) Revenue 025 1, Consistently achieved over 55% gross margins 4-year 6-year 12-year Common financials Positive EBITDA EBITDA (percent) Revenue 1, while managing SG&A/R&D investments to produce positive EBITDA Consistent positive cash flow from operations Cash Flow Revenue 1,000 and positive cash flow from operations as early as $25M Source: Standard & Poor s Compustat, Blueprint analysis 22

24 6. DYNAMIC DUO LEADERSHIP Ultimate high high performance team team Synergies between each each other other One One made made up up for for the the weaknesses of of the the other other Complementary skills skills and and talents talents One One was was outside facing facing One One was was inside inside facing facing Complete respect and and trust trust in in each each other other Make Make swift swift decisions Highly Highly Exploratory + Self-correct for for their their mistakes Source: Blueprint analysis 23

25 INSIDE OUTSIDE LEADERSHIP PAIRS Company Microsoft Tractor Supply ebay ebay Siebel Siebel Starbucks Yahoo! Broadcom Leadership pair pair examples Jon Jon Shirley Shirley --Bill Bill Gates Gates Jim Jim Wright Wright Joe Joe Scarlett Maynard Webb Webb --Meg Meg Whitman Patricia House House --Thomas Siebel Siebel Orin Orin Smith Smith -- Howard Schultz Jeff Jeff Mallett Mallett --Tim Tim Koogle Henry Henry Samueli- Henry Henry Nicholas III III Source: Blueprint analysis 24

26 INSIDE - OUTSIDE LEADERSHIP PAIR 1990s and 2005 Jon Shirley and Bill Gates Jim Wright and Joe Scarlett Source: Courtesy Microsoft Archives, Tractor Supply Company 25

27 BLUEPRINT LEADERSHIP Passion for for the the company Passion relevant to to customers Consistent strength of of will will to to execute Committed to to the the company not not the the position they they fill fill Highly Highly exploratory Feedforward vs. vs. feedback Problem solvers Self Self Correct, team team problem solving Consistent values: messaging, defining moments Blueprint Leadership = Focus Focuson on relationships and and products X Drive Driveto to innovate and and explore X Ability Abilityto to manage the the 7 Essentials simultaneously Source: Blueprint analysis 26

28 7. BLUEPRINT COMPANY BOARD OF DIRECTORS (Blueprint) CEO Management (Marquee) Customer Strategic alliance Community member Other Investor Board dominated by investors and management teams tended to be associated with companies that struggled Source: Company Reports, Blueprint analysis 27

29 ESSENTIALS SCORE CARD Revenue $ Millions Breakthrough Value Proposition Exploit High Growth Market Seg t Marquee Customers Growth Blueprint Big Brother Alliances Business Model of Exponential Returns Inside-Outside Leadership Board of Essentials Experts Source: Company Reports, Blueprint analysis 28

30 ESSENTIALS DYNAMICS Exploit a high growth market segment Leverage Big Brother alliances Marquee Customers shape shape the the revenue powerhouse Create Create and and sustain a breakthrough value value proposition Create Create and and sustain exponential returns Source: Blueprint analysis 29

31 TOP SOFTWARE INDUSTRIES PROFILE US Companies - $30-1,000M revenue, 3Q2005 Industry Number of companies Median Rev. ($M) Total Revenues ($B) Applications Internet Software/Scvcs IT Consulting/Scvcs Systems Home Entertainment

32 EXPLORING THE BOUNDARIES OF GROWTH US Companies - $30-1,000M revenue, 3Q2005 Top 2 Companies based on growth rates Industry Revenue Growth (%) Revenues ($M) Applications Internet Software/Svcs IT Consulting/Scvcs Systems Software

33 OVERARCHING BLUEPRINT LESSONS Your Your Value Value Proposition drives drives the the other other essentials make make it it distinctive Execute the the 7 Essentials early early in in order order to to shorten the the time time to to the the inflection point point To To achieve exponential growth growth it it is is about about getting getting on on trajectory by by maximizing your your growth growth at at the the inflection point point -- --outgrow your your competition! Executing all all 7 Essentials enhances your your ability ability to to achieve exponential revenue with with returns Maximize your your value value by by looking like like an an up-andcoming Blueprint Company! 32

34 ALL THE BEST IT IS IMPORTANT YOU SUCCEED May this Blueprint serve you well on on your growth journey 33