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Redefining the Competitive Arena
Elisabetta Bell September, 8, 2010 Preparing for the Upturn
Key Messages ƒ The competitive landscape is changing and becoming more aggressive. ƒ Marketing can play an important role to help achieving business goals. ƒ We need to move to a Solutions Organization and to be successful we need to build a strong Marketing Organization ƒ The right talent is critical for success. Right people, right skills, right place. 5th People Conference | Leading the Transformation Santiago, Chile | September 7-10, 2010
Burning Platform • Competitive landscape is rapidly changing • We are losing market share, differentiation and competitive advantage • PINS are declining worldwide • Our business model depends on capturing market share and harvesting profits • Need to use Marketing at a strategic level and not just tactical • Use Marketing to create differentiation • Competitive Intelligence is essential to effective strategic positioning 5th People Conference | Leading the Transformation Santiago, Chile | September 7-10, 2010
Burning Platform
Declining PINS
Potential Disintermediation More aggressive Competition
Entrance of new non-traditional competitors 5th People Conference | Leading the Transformation Santiago, Chile | September 7-10, 2010
Times have changed ….. Facts from the past 5 years prior to 2009 ƒ Caterpillar as the market leader ƒ Rental revenue has grown by 178% and locations by 21% ƒ CUE concept implemented and driving used equipment sales growth - 117% ƒ POPS-C increased by 13% ƒ Number of 5 stars workshop ƒ 13,100 x active CSA’s Market Position
B
Excav.
Earth.
Paving
Mining
Quarry
Ratio of Cat Unit PINS to Nearest competitor
0.9 x
2.1 x
2.3 x
2.0 x
3.3 x Komatsu
3.0 x Random
CNH
Komatsu
Komatsu
Dynapac
5th People Conference | Leading the Transformation Santiago, Chile | September 7-10, 2010
Declining PINS
5th People Conference | Leading the Transformation Santiago, Chile | September 7-10, 2010
Market Shifting to Developing World Machines: Worldwide Delivery Trends – Rolling 12 Months
Markets growing fastest where we have lowest PINS
Note: Delivery Data – Actuals: thru Feb 2010 & Forecast: March RBM - Mar 2010 thru Dec 2012
5th People Conference | Leading the Transformation Santiago, Chile | September 7-10, 2010
Big Shareholder Win vs. S&P and Competitors: ’92-’09 S&P500 Total Shareholder Return ’92 to ‘09
30%
TSR 25%
Paccar
20%
(16.7% TSR)
Caterpillar
15%
Volvo Komatsu
10%
Deere
(10.5% TSR)
Cummins
(7.9% TSR)
Emerson
(14.5% TSR)
(11.5% TSR)
(15.5% TSR)
Solid performance over the long term
(9.0% TSR)
5%
Percentile 0% 5%
13%
21%
28%
36%
44%
52%
60%
68%
76%
84%
92%
-5%
Median TSR = 2.8%
Median TSR = 7.1%
Median TSR = 10.8%
-10%
5th People Conference | Leading the Transformation Santiago, Chile | September 7-10, 2010
Median TSR = 16.2%
100%
Recent Slippage vs. S&P and Competitors: ’06—’09 S&P500 Total Shareholder Return ’06 to ‘09
50%
TSR 40%
30%
Eroding performance peak to trough
20%
10%
Cummins (17.5% TSR)
Caterpillar
(1.6% TSR)
5%
11%
17%
23%
29%
35%
41%
47%
Volvo
Paccar
(-14.5% TSR)
(- 4.1% TSR)
53%
Deere (6.4% TSR)
(0.2% TSR)
0%
-10%
Emerson Komatsu (1.9% TSR) 58%
64%
70%
76%
82%
88%
94%
-20%
-30%
-40%
Median TSR = -19.6%
Median TSR = -7.3%
Median TSR = 0.9%
5th People Conference | Leading the Transformation -50%
Santiago, Chile | September 7-10, 2010
Median TSR = 10.3%
100%
Percentile
Why is this happening? • Aggressive Competition • Decreasing Product Differentiation • Eroding price-value perception • Disted customer experience • Eroding Customer Loyalty • Quality • Availability • Tactical rather than strategic focused • Failure to target the customers of tomorrow 5th People Conference | Leading the Transformation Santiago, Chile | September 7-10, 2010
What is Our Business Model ?
5th People Conference | Leading the Transformation Santiago, Chile | September 7-10, 2010
The Caterpillar Business Model Executed in Close Partnership with our Dealers
5th People Conference | Leading the Transformation Santiago, Chile | September 7-10, 2010
Business Model – HARVEST ƒ
Aggressively pursue parts and services – – – – –
ƒ
Unmatched Dealer –
–
5th People Conference | Leading the Transformation Santiago, Chile | September 7-10, 2010
Industry specific solutions Right value: Life Cycle vs. Utility Easy to do business with 2nd and 3rd owners Solve customer problems Dealer capabilities Sales / marketing focus Use of information technology Growth markets
We Plant, Others Harvest…
5th People Conference | Leading the Transformation Santiago, Chile | September 7-10, 2010
Traditional Competitors
Product differentiation is declining when compared to traditional competitors, placing pressure on product margins and pricing power CSF: PRODUCT
5th People Conference | Leading the Transformation Santiago, Chile | September 7-10, 2010
New competitors…
5th People Conference | Leading the Transformation Santiago, Chile | September 7-10, 2010
Need to move from product centric to customer centric
We will not be able to make competitors irrelevant in the eyes of the customers by focusing just on the product. The goal is for Marketing to manage profitable customer experience and relationships and capture value in return. 5th People Conference | Leading the Transformation Santiago, Chile | September 7-10, 2010
What are we doing about it? Caterpillar has taken steps moving toward integrating marketing within the organization to drive solutions for our customers needs.
The end goal is to become a world-class marketing organization improving our capabilities benchmarking best in class practices both internally and externally. 5th People Conference | Leading the Transformation Santiago, Chile | September 7-10, 2010
World Class Marketing companies… • Follow emerging trends to find the highest profit opportunities • Drive a stronger positioning vs. competition and improve price-value perception • Target the customers of tomorrow • Provide memorable customer experience • Strategic focused rather than tactical
5th People Conference | Leading the Transformation Santiago, Chile | September 7-10, 2010
Research shows ……. The Marketing Leadership Council research shows that companies that emphasize gathering competitor information outperformed their peers in revenue growth, gross margins and sales. In addition, information-focus firms experienced greater market share and earnings per share.
CEO’s that believed in the importance of competitive intelligence and used the information were able to increase revenue considerably even during uncertain economic times.
5th People Conference | Leading the Transformation Santiago, Chile | September 7-10, 2010
Marketing Landscape:
Marketing Strategy
Players
Creating sustainable advantage
Arena
Implementation Tools
Copyright Dr. Sridhar Balasubramanian, UNC Chapel Hill
5th People Conference | Leading the Transformation Santiago, Chile | September 7-10, 2010
Marketing Leads by ….. ƒ Providing deep customer and market understandingMarketing converts insightadvantage into value for ƒ Driving competitive targeting the right the corporation and customers with the right solutions becomes a driver of ƒ Increasing share of wallet Revenue and Profit ƒ Enabling processesGrowth and systems
5th People Conference | Leading the Transformation Santiago, Chile | September 7-10, 2010
Strategic vs. Tactical role Integrating with other areas of organization
ƒ ƒ ƒ ƒ
Provide company-wide customer insight Drive effective decision making Focus on driving preference through loyalty. Achieve differentiation
5th People Conference | Leading the Transformation Santiago, Chile | September 7-10, 2010
What’s in it for Us… ƒ ƒ ƒ ƒ ƒ
Offer Differentiated Solutions Increased Market Share Increased Customer Loyalty Maximized Resources Increased Profits
5th People Conference | Leading the Transformation Santiago, Chile | September 7-10, 2010
Next Steps Move from functional marketing to strategic marketing Commit to improving with us… - Willing to adapt to marketplace changes - Understanding of marketing principles - Developing marketing functions - Leading a culture that s solutions marketing
Dealer transformation is key! 5th People Conference | Leading the Transformation Santiago, Chile | September 7-10, 2010
How can Marketing and HR work together?
ƒ HR and Marketing touch the entire organization ƒ Need to work together to identify necessary initiatives to drive this important change to solutions ƒ HR needs to with talent recruiting, development and retention ƒ Align strategic processes to marketing efforts ƒ Work together around the change management framework to drive transformation
5th People Conference | Leading the Transformation Santiago, Chile | September 7-10, 2010
Elisabetta Bell September, 8, 2010 Preparing for the Upturn
Key Messages ƒ The competitive landscape is changing and becoming more aggressive. ƒ Marketing can play an important role to help achieving business goals. ƒ We need to move to a Solutions Organization and to be successful we need to build a strong Marketing Organization ƒ The right talent is critical for success. Right people, right skills, right place. 5th People Conference | Leading the Transformation Santiago, Chile | September 7-10, 2010
Burning Platform • Competitive landscape is rapidly changing • We are losing market share, differentiation and competitive advantage • PINS are declining worldwide • Our business model depends on capturing market share and harvesting profits • Need to use Marketing at a strategic level and not just tactical • Use Marketing to create differentiation • Competitive Intelligence is essential to effective strategic positioning 5th People Conference | Leading the Transformation Santiago, Chile | September 7-10, 2010
Burning Platform
Declining PINS
Potential Disintermediation More aggressive Competition
Entrance of new non-traditional competitors 5th People Conference | Leading the Transformation Santiago, Chile | September 7-10, 2010
Times have changed ….. Facts from the past 5 years prior to 2009 ƒ Caterpillar as the market leader ƒ Rental revenue has grown by 178% and locations by 21% ƒ CUE concept implemented and driving used equipment sales growth - 117% ƒ POPS-C increased by 13% ƒ Number of 5 stars workshop ƒ 13,100 x active CSA’s Market Position
B
Excav.
Earth.
Paving
Mining
Quarry
Ratio of Cat Unit PINS to Nearest competitor
0.9 x
2.1 x
2.3 x
2.0 x
3.3 x Komatsu
3.0 x Random
CNH
Komatsu
Komatsu
Dynapac
5th People Conference | Leading the Transformation Santiago, Chile | September 7-10, 2010
Declining PINS
5th People Conference | Leading the Transformation Santiago, Chile | September 7-10, 2010
Market Shifting to Developing World Machines: Worldwide Delivery Trends – Rolling 12 Months
Markets growing fastest where we have lowest PINS
Note: Delivery Data – Actuals: thru Feb 2010 & Forecast: March RBM - Mar 2010 thru Dec 2012
5th People Conference | Leading the Transformation Santiago, Chile | September 7-10, 2010
Big Shareholder Win vs. S&P and Competitors: ’92-’09 S&P500 Total Shareholder Return ’92 to ‘09
30%
TSR 25%
Paccar
20%
(16.7% TSR)
Caterpillar
15%
Volvo Komatsu
10%
Deere
(10.5% TSR)
Cummins
(7.9% TSR)
Emerson
(14.5% TSR)
(11.5% TSR)
(15.5% TSR)
Solid performance over the long term
(9.0% TSR)
5%
Percentile 0% 5%
13%
21%
28%
36%
44%
52%
60%
68%
76%
84%
92%
-5%
Median TSR = 2.8%
Median TSR = 7.1%
Median TSR = 10.8%
-10%
5th People Conference | Leading the Transformation Santiago, Chile | September 7-10, 2010
Median TSR = 16.2%
100%
Recent Slippage vs. S&P and Competitors: ’06—’09 S&P500 Total Shareholder Return ’06 to ‘09
50%
TSR 40%
30%
Eroding performance peak to trough
20%
10%
Cummins (17.5% TSR)
Caterpillar
(1.6% TSR)
5%
11%
17%
23%
29%
35%
41%
47%
Volvo
Paccar
(-14.5% TSR)
(- 4.1% TSR)
53%
Deere (6.4% TSR)
(0.2% TSR)
0%
-10%
Emerson Komatsu (1.9% TSR) 58%
64%
70%
76%
82%
88%
94%
-20%
-30%
-40%
Median TSR = -19.6%
Median TSR = -7.3%
Median TSR = 0.9%
5th People Conference | Leading the Transformation -50%
Santiago, Chile | September 7-10, 2010
Median TSR = 10.3%
100%
Percentile
Why is this happening? • Aggressive Competition • Decreasing Product Differentiation • Eroding price-value perception • Disted customer experience • Eroding Customer Loyalty • Quality • Availability • Tactical rather than strategic focused • Failure to target the customers of tomorrow 5th People Conference | Leading the Transformation Santiago, Chile | September 7-10, 2010
What is Our Business Model ?
5th People Conference | Leading the Transformation Santiago, Chile | September 7-10, 2010
The Caterpillar Business Model Executed in Close Partnership with our Dealers
5th People Conference | Leading the Transformation Santiago, Chile | September 7-10, 2010
Business Model – HARVEST ƒ
Aggressively pursue parts and services – – – – –
ƒ
Unmatched Dealer –
–
5th People Conference | Leading the Transformation Santiago, Chile | September 7-10, 2010
Industry specific solutions Right value: Life Cycle vs. Utility Easy to do business with 2nd and 3rd owners Solve customer problems Dealer capabilities Sales / marketing focus Use of information technology Growth markets
We Plant, Others Harvest…
5th People Conference | Leading the Transformation Santiago, Chile | September 7-10, 2010
Traditional Competitors
Product differentiation is declining when compared to traditional competitors, placing pressure on product margins and pricing power CSF: PRODUCT
5th People Conference | Leading the Transformation Santiago, Chile | September 7-10, 2010
New competitors…
5th People Conference | Leading the Transformation Santiago, Chile | September 7-10, 2010
Need to move from product centric to customer centric
We will not be able to make competitors irrelevant in the eyes of the customers by focusing just on the product. The goal is for Marketing to manage profitable customer experience and relationships and capture value in return. 5th People Conference | Leading the Transformation Santiago, Chile | September 7-10, 2010
What are we doing about it? Caterpillar has taken steps moving toward integrating marketing within the organization to drive solutions for our customers needs.
The end goal is to become a world-class marketing organization improving our capabilities benchmarking best in class practices both internally and externally. 5th People Conference | Leading the Transformation Santiago, Chile | September 7-10, 2010
World Class Marketing companies… • Follow emerging trends to find the highest profit opportunities • Drive a stronger positioning vs. competition and improve price-value perception • Target the customers of tomorrow • Provide memorable customer experience • Strategic focused rather than tactical
5th People Conference | Leading the Transformation Santiago, Chile | September 7-10, 2010
Research shows ……. The Marketing Leadership Council research shows that companies that emphasize gathering competitor information outperformed their peers in revenue growth, gross margins and sales. In addition, information-focus firms experienced greater market share and earnings per share.
CEO’s that believed in the importance of competitive intelligence and used the information were able to increase revenue considerably even during uncertain economic times.
5th People Conference | Leading the Transformation Santiago, Chile | September 7-10, 2010
Marketing Landscape:
Marketing Strategy
Players
Creating sustainable advantage
Arena
Implementation Tools
Copyright Dr. Sridhar Balasubramanian, UNC Chapel Hill
5th People Conference | Leading the Transformation Santiago, Chile | September 7-10, 2010
Marketing Leads by ….. ƒ Providing deep customer and market understandingMarketing converts insightadvantage into value for ƒ Driving competitive targeting the right the corporation and customers with the right solutions becomes a driver of ƒ Increasing share of wallet Revenue and Profit ƒ Enabling processesGrowth and systems
5th People Conference | Leading the Transformation Santiago, Chile | September 7-10, 2010
Strategic vs. Tactical role Integrating with other areas of organization
ƒ ƒ ƒ ƒ
Provide company-wide customer insight Drive effective decision making Focus on driving preference through loyalty. Achieve differentiation
5th People Conference | Leading the Transformation Santiago, Chile | September 7-10, 2010
What’s in it for Us… ƒ ƒ ƒ ƒ ƒ
Offer Differentiated Solutions Increased Market Share Increased Customer Loyalty Maximized Resources Increased Profits
5th People Conference | Leading the Transformation Santiago, Chile | September 7-10, 2010
Next Steps Move from functional marketing to strategic marketing Commit to improving with us… - Willing to adapt to marketplace changes - Understanding of marketing principles - Developing marketing functions - Leading a culture that s solutions marketing
Dealer transformation is key! 5th People Conference | Leading the Transformation Santiago, Chile | September 7-10, 2010
How can Marketing and HR work together?
ƒ HR and Marketing touch the entire organization ƒ Need to work together to identify necessary initiatives to drive this important change to solutions ƒ HR needs to with talent recruiting, development and retention ƒ Align strategic processes to marketing efforts ƒ Work together around the change management framework to drive transformation
5th People Conference | Leading the Transformation Santiago, Chile | September 7-10, 2010
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