Background and challenge
The global construction and building materials sector has been adapting rapidly in recent times, and is poised for further rapid change in the next five to 10 years as the needs of channel partners and end users evolve on a wide scale. Executives within the sector are being asked to accommodate a broad range of changes to their business strategies, including improvements in material characteristics, increases in digital engagement, new methods of installation and adaptive supply chain processes.
Recognising these challenges, a leading manufacturer of building materials asked L.E.K. Consulting to help develop a responsive and growth-focused ‘five-year strategy’ that would ensure its portfolio would be able to take advantage of the trends in its sector and be fit for the future.
Approach and recommendations
To provide a new portfolio strategy that was both supportable and tangible, L.E.K. worked with its client to develop a detailed fact base of insights on the trends affecting the building materials industry. These trends were then assessed on their global maturity and potential impact on local markets in order to determine their relevance to the client’s portfolio.
A prioritisation framework was developed to synthesise the collective impact of these trends and, through a series of workshops, used to generate a focused shortlist of trends that presented the greatest opportunity or threat to the client. These trends also provided potential areas for future investment and growth for the client.
The second phase of work focused on understanding the current and future profitability of the client’s businesses and of the adjacent materials and value chain activities that sat around the current portfolio. Market segments were assessed across factors such as scale, profitability, competitive intensity, growth potential and alignment with client capabilities, in order to develop potential areas of future participation.
Drawing on the results of the prioritisation exercise for trends, divisions and new market segments, L.E.K. facilitated workshops with the client’s executive team to review a number of potential portfolio logics and growth pathways, narrowing down to a preferred choice for the future portfolio.
With the portfolio selected, the final phase of work developed a roadmap for implementation, highlighting the potential capital investment and value returns from the amended portfolio as well as the necessary capabilities required to successfully execute the updated strategy of the business.
Results
The new portfolio strategy had the potential to provide a potential earnings before interest and taxes uplift of almost 50%. A clear and actionable prioritisation roadmap allowed the client to make informed corporate development decisions, supported by the insights from the fact base of global trends. The talent function was able to focus on the building of priority capabilities in the firm.
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