This client is a long-established company making heavy equipment for the mining and construction industries. For more than 100 years, the company had developed a stellar reputation in this area, and has recently diversified beyond its traditional base.
Through a series of acquisitions and divestments Industrial Co. had built a ‘diversified industrial company’ with a range of businesses. In the last 10 years well-known brands in personal transportation, trucking, security, and food processing were added to the portfolio.
In the late 90’s Industrial Co. executed a financial plan across these businesses to reduce working capital and thereby increase margins and earnings per share. The plan was successful, as over this period working capital was substantially reduced, and margins grew from 8% to over 14%. Meanwhile earnings per share grew at an impressive 22%, compounded annually. However, top-line growth over this period came primarily from acquisitions made from operating cash flows, and perhaps for this reason Industrial Co. was still perceived by the stock market as a low-growth, heavy manufacturer. The stock price underperformed its peers and trailed Industrial Co’s EPS improvements dramatically.
In 1999, a new CEO was appointed. The CEO believed that while Industrial Co. had made great strides in operating efficiencies, the next task was to add an emphasis on organic growth and change the market’s perception of the company. Recognizing the diversity of customers, markets, products, services, and capabilities within Industrial Co. the CEO knew that the whole was greater than the sum of the parts. He believed that by leveraging the whole enterprise new opportunities for growth could be found. He also knew that achieving synergy from the corporation’s businesses would change what jobs were performed, who performed them, how they were organized and rewarded, and even how employees thought about the company and their job. This disruption would be a major challenge for the organization, and require skillful implementation if it were not to create confusion, loss of direction, and disenchantment.
The CEO chose Alder Associates to partner with him because he believed that we could understand his vision and what it would take to accomplish it across multiple dimensions: from strategic to tactical, from cultural to organizational, and from the enterprise to personal levels. He would use our experience and capabilities to supplement those of his company where necessary to achieve this fundamental transformation.