DPO&Co- Daniel P. O'Reilly & Company

DPO&Co- Daniel P. O'Reilly & CompanyDPO&Co- Daniel P. O'Reilly & CompanyDPO&Co- Daniel P. O'Reilly & Company

DPO&Co- Daniel P. O'Reilly & Company

DPO&Co- Daniel P. O'Reilly & CompanyDPO&Co- Daniel P. O'Reilly & CompanyDPO&Co- Daniel P. O'Reilly & Company
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    • Home
    • Strategy Consulting
      • Industry Experience
      • Functional Expertise
    • Private Investing
    • BPO
    • M&A Financial Diligence
    • Our Team
      • US Team
      • Asia Team
      • Colombia Team
    • More
      • Contact Us
      • White Papers
      • Recent News
  • Home
  • Strategy Consulting
    • Industry Experience
    • Functional Expertise
  • Private Investing
  • BPO
  • M&A Financial Diligence
  • Our Team
    • US Team
    • Asia Team
    • Colombia Team
  • More
    • Contact Us
    • White Papers
    • Recent News

INDUSTRIALS

OVERVIEW

Volatile commodity markets can cause tremendous pressure on competitors throughout the industrial sector, making robust strategic planning critical for building a competitive advantage. Not only are commodities traditionally a major input cost for industrial participants, but customer demand growth is also often driven by commodity prices. For instance, high demand growth drove record revenue and economic profits for the global agriculture equipment segment until 2013, but has slumped since the peak, leaving competitors with a tough road ahead. Metals prices are rebounding, economies are growing and public works projects are in the pipeline, creating a potential tailwind for other equipment manufacturers. 

Given these cyclical changes, competitors must capture maximum value during positive cycles and mitigate losses during downturns. Achieving this requires a detailed understanding of which products, parts, customers, and markets drive economic value added (EVA) and which ones destroy value. DPO&Co has deep experience helping clients understand where and why EVA exists and driving strategies that allocate resources optimally. 

CASE EXAMPLE 

12-Week Project: Identified $350M accretive revenue ($50-$80M profit) potential for heavy industrial client by assessing profitable adjacent markets, also advising against pursuing six shortlisted products

Situation 

  • Due to changes in technology and consumer preference, economists forecasted client was poised to lose ~$250M in revenue and ~$100M in profit
  • Given client's core engineering capabilities, they were considering ten growth opportunities they felt could fill the void from the loss in this business
  • Expansion appeared to be a logical expansion of a very profitable business, but we were skeptical of the client's sources of differentiation  

Approach

  • Developed fact base by segmenting the market into OEMs that had strong sources of differentiation and generic "will-fit" manufacturers
  • Conducted public desk research to determine OEMs generate ~4x profit than generic manufacturers
  • Established hypothesis that brand, distribution, engineering expertise and IP access drive profit
  • Created robust framework to analyze client capabilities on these four metrics
  • Leveraged public desk research to calculate overall profit pool and potential market share by comparing client on these metrics
  • Ranked opportunities by value at stake and highlighed one strong opportunity, several moderate opportunities and several negative economic profit pools
  • Identified several other operational efficiencies within the business that could fill profit gap using information captured organically during client interview phase

Impact and Results 

  • Client received actionable plan for pursuing the highest value at stake opportunity, worth $200M in new revenue and $30-60M profit
  • Management had significant evidence contrary to initial internal hypotheses, which drove the decision to not pursue growth that would destroy stakeholder value
  • Key stakeholders were aligned and trained to use framework to evaluate future adjacent market growth opportunities  

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