Background and challenge
A leading manufacturer and distributor of building materials was looking to determine the strategic direction for its products division over the next decade. Having built a leading position in a commodity-like industry that has a consolidated industry structure, the options for growth had to consider many new dimensions and end markets. L.E.K. Consulting worked with the executive team to develop a comprehensive assessment of attractiveness, fit, method(s) of entry and financial returns as part of the final recommendations. The company is implementing the recommendations after board and executive-level support of the conclusions.
Approach and recommendations
We created and prioritized a list of more than 100 potential organic and inorganic growth opportunities and assessed both the commercial potential and resources required to realize each. These growth opportunities were identified based on a comprehensive framework of core competencies and competitive advantage. To create an efficient evaluation process and ensure that the most promising opportunities were identified, we pared down the candidates as follows:
- Some opportunities were deprioritized based on their low level of synergistic potential.
- Many opportunities were deprioritized because of situation-specific reasons.
- The remaining opportunities were evaluated against a long list of criteria, including market size, margins, industry structure, cyclical risk, ownership benefits, method(s) of entry, channel conflict/fit and synergy potential; scores for each criterion were added to yield an overall attractiveness score.
- Ultimately, the remaining opportunities were prioritized and consolidated to develop an overall growth strategy for the client with a robust financial case.
We then performed in-depth research and analysis on the opportunities to gain an understanding of their financial implications, potential risks, entry options and overall attractiveness. Finally, we developed a strategic plan to pursue the most attractive opportunities. The plan included customers to target, product/service offerings, positioning and required investment.
The exhaustive research process yielded a set of six key growth opportunities from a universe of more than 100 identified. Formal discussions with the executive team resulted in internal alignment regarding the growth opportunities as well as the confidence to pursue them. Furthermore, the client will be able to use the framework we developed to assess future growth opportunities.