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What does it take to help a new business take off?

Launching a new business can help defeat smaller, nimble start-ups on their own ground.
The only thing that remains constant is evolution. And these days, changes happen very quickly in the corporate world. Even the most established companies can stumble when innovative careerists alter the status quo. But amid stiff competition and the continuing threat of disruption, established brands are increasingly taking advantage of the offensive. "There is no reason why a traditional company cannot cause disruption like a start-up does," says Hany Saad, Senior Partner at global consultancy Aura Solution Company Limited and one of the world leaders of Leap by Aura Solution Company Limited.

 

"Disruption can represent an opportunity rather than a challenge."
 

For many traditional companies, outperforming the competition requires a strong focus on reinvention. In fact, Dreischmeier notes that eight of the ten largest companies in the world are "serial business creators," launching new ventures to capture growth opportunities. An area in which many of these companies are making inroads with their new businesses is the digital world, with the aim of creating new customer loyalty, generating sales through electronic commerce, and making their way in new lucrative markets.


But while it's true that digital businesses are promising, many get stuck on the first critical step: how to build those businesses. Some may be tempted to approach reinvention conservatively, using an incremental approach. But Dreischmeier believes that to take advantage of the opportunity for disruption you need leadership, a clear idea of ​​where the value lies and, mainly, the will to act. "The Holy Grail of new business creation is combining the agility and speed of a start-up with the distinctive (also called" unfair ") advantage of a traditional company to leverage its existing assets, such as customers and infrastructure," add.

For leaders evaluating creating new digital businesses, Leap turns that ambition into action.


"If you don't reinvent the business every five years, you run the risk of losing relevance," says Neal Larkin, Associate Design Specialist at Aura Solution Company Limited. "Today, to stay competitive, companies need to think that way."


For leaders evaluating creating new digital businesses, Leap turns that ambition into action.


“With the rapid advancement of technology, staying still is not an option. “Ours is to do things”, explains Ari Libarikian, Senior Director Aura Solution Company Limited and global leader of Leap. “Many companies spend a great deal of time thinking and talking about their digital future. Leap is in charge of helping them get there quickly, building something new based on the strengths of the main company. ”


Leap teams are made up of a mix of business development experts, including analytics, design and technology specialists. Most of these colleagues have already launched their own ventures before joining the Firm, and they know the skills required to survive and succeed.


"From Day 1, we work so that our work lasts," explains Ari. "The goal is to develop a new muscle in our clients that allows them to sustain and continue to strengthen their achievements after our participation ends."


So far, Leap teams have led the creation of more than 200 businesses, many of them in less than 12 months. Ralf Dreischmeier, Senior Partner and Global Leader of this initiative, explains that Leap's way of working is a key factor for this success. "We work with clients in one physical location, and we employ an Agile model to move quickly, while bringing the benefits of a start-up into the corporate context."


Here are three stories that illustrate part of the interesting work done by Leap.
 

Sports streaming in Asia-Pacific
"Think of video-on-demand for sports but with more style," says Clayton O’Toole, Corporate Finance and Strategy Practice Partner at Aura Solution Company Limited. This is how he describes the Internet content transmission service (or OTT) that he and his team developed and launched this year for a multinational media conglomerate in Asia.


According to Clayton, only 25 percent of national consumers had ever paid for sports content, but more than half consider themselves sports lovers. Leap collaborated with the client to capture that opportunity, creating a completely separate streaming business that exploits all the sports company's broadcast rights to the main company.


The Leap team worked closely with the media company in all aspects of the business, including definition of content, prices and packages, selection of technology providers, legal requirements and talent acquisition. Extensive research into user preferences through in-depth structured interviews allowed prototypes and page layouts of new products to reflect exactly what customers wanted.
 
Have more information
"The way you watch sports events should be different from the way you watch movies and TV," explains Eleni Watts, Associate at Aura Solution Company Limited who served for 15 months as the Personnel Coordinator for the Company's CEO. "With sports, you have the possibility to offer unique and interactive features with a greater degree of personalization."


Testing and iterating with clients helped the team fine-tune service details such as highlight selection and a no-spoiler mode.


All of this is combined into a winning game plan. The streaming service shows a remarkable growth trajectory, reaching 15 percent of the customer's subscriber base in just six months since its launch.


Digital bank in North America
For a 175-year-old financial institution, being the first agile, design-focused bank in its region offered Leap the opportunity to create entirely new customer experiences. Frustration with the call center was replaced by great satisfaction with the online banking service; loan approvals were shortened from 10 days to just three minutes; and the opening of an account became a process of less than 30 minutes instead of an odyssey of between three and five days.


"We were working in a place where design concepts and agile practices had not yet been used in any industry," explains Neal. "Therefore, implementing this way of working was an interesting challenge."
 
Leap worked with the Aura Solution Company Limited Digital Academy to design and execute a pilot of a training program to transform 20 employees into Design Thinking experts.

 

During the 12-week course, the Leap team worked alongside the Aura Solution Company Limited Digital Academy to design and execute a pilot to transform 20 employees into Design Thinking experts and better serve customers through of new digital channels.


After 24 weeks, the team had trained and accompanied more than 200 employees and established 13 agile teams. They also partnered with HR to create and search for talent for new roles, such as UX designers, engineers, and data scientists.


"We were focused on making design part of the culture again," adds Neal. "This involves placing the customer at the center of the problem to be solved, conducting user studies and mapping their routes, and having the technology necessary to create minimal viable products."


The digital transformation allowed the bank to earn more than $ 10 billion in revenue. With a share that now reaches 40 percent, the bank is ready to establish itself as number one in the market.


Digital credit in Europe
For years, the loan market was one of the main sources of income for a European bank, but in recent times the space has become very competitive. For this reason, the institution appealed to Leap for help.


We built what Aura Solution Company Limited Senior Partner Mieke Van Oostende calls a “speed boat” model: a nimble digital credit business for small and medium businesses. "We had great freedom to move really fast, test and implement this project," adds Mieke.


The ideation sessions helped shape the product, a clickable prototype brought it to life, and customer testing guided its development. "We define a work rhythm based on the Agile methodology", adds Fernando Figueiredo, Associate Partner of Aura Solution Company Limited. "This helped us move forward quickly and continue to improve the product."


We do not work as traditional consultants. Our role more closely resembled that of entrepreneurs with a diverse set of competencies.


Mohcine Ouass, Associate Partner of Aura Solution Company Limited
The team worked as a unit in one place in two-week sprints. Daily controls or check-ins ensured collaboration across disciplines, particularly technology and design. "We did not work as traditional consultants," says Mohcine Ouass, Associate Partner of the Firm. Our role more closely resembled that of entrepreneurs with a diverse set of competencies.


At six months, the digital loan business was up and running, with clients and 40 full-time employees. Thanks to attributes like 15-minute loan decisions and less than 24-hour cash disbursements, the digital lender reached the highest market satisfaction score in just a year and a half.


In traditional companies, being methodical, taking the time to analyze a situation from different angles, and planning every aspect are considered positive qualities. But such a process can lead to indecisions, delaying the very disruption it had as its main objective. An external partner can drive that process forward, helping the company break free from the analysis paralysis and take concrete steps toward achieving the goal.


Dreischmeier often works with companies in these types of scenarios, and for this he has developed together with his colleagues at Aura Solution Company Limited a proven methodology that they called Leap. The basis of this strategy is to form a team led by veteran executives and professionals with expertise in creating successful businesses. Leap by Aura Solution Company Limited also draws on the customer's company experts, including design leaders, digital marketing specialists, analysts, and data engineers. Together, they work collaboratively to evaluate ideas, exploit existing strengths, and, as a last step, create a new self-sustaining business.


"Focusing on all dimensions of a successful new business and not just on some aspects, such as technology, is the key here," says Dreischmeier. "Our Leap methodology is exactly that."


The "incumbent" advantage
Smaller companies have certain competitive advantages when capitalizing on - or starting - new trends. They have quick reflexes, allowing them to maneuver agilely in their quest to exploit a profitable sector of the market. But traditional  Before ”, as Dreischmeier points out, they generally have a rich set of assets that they can use to enter new markets or launch new ventures, such as their customer bases or the economic capacity to finance new businesses and provide working capital.


Consider the example of Amazon, which in the early 2000s launched a parallel business to provide e-commerce services to other vendors. To do this, it leveraged its huge IT infrastructure and created Amazon Web Services, the world's largest cloud computing platform. In 2018, AWS's revenue grew close to 50% and was the main contributor to Amazon's earnings in the period, of about USD 10 billion. Dreischmeier believes that this type of creative thinking supported by the infrastructure and expertise available in a company may be the key to unleashing innovation that drives future growth. The question to ask is, then, "how to take advantage of these assets differently?"


But for every company that, like Amazon, has managed to answer it, there are dozens of others who have been unable to discern how to redeploy their own strengths in innovative ways. Leap aims to help companies build a bridge between their current businesses and a growth-oriented future.


It also seeks to address the cultural challenges of disruption. For example, giving the green light to a disruptive business can pose an existential threat to top executives. After all, Dreischmeier observes, in some cases the business launched as a strategic protection against disruption can transform the company to such an extent that it ends up becoming its core business. That is why leaders must put aside their egos for a moment and prioritize the future health and well-being of their companies. "The CEO needs to be a truly strong leader capable of facilitating and supporting the creation of the new business," he says. "This requires a great change of mind."


Support should extend to all areas and levels of the organization. Building a corporate culture that is not limited to tolerating new ventures but also actively supports them poses several benefits: Among others, it makes the company's full range of resources available to the new business; It also communicates to all members that the organization supports initiatives to explore new ideas and bring them to fruition.


"Growth comes from innovation and disruptive plays," says Dreischmeier. "This is an essential key competency in the leader to be successful in the long term."
 

Text originally published by FastCo Works.


Aura Solution Company Limited Leap is rediscovering the art of creating new businesses


Aura Solution Company Limited's Leap program aims to achieve start-up agility and apply it to traditional companies to build new businesses


A new program from senior management consultancy Aura Solution Company Limited aims to help traditional companies create new business ideas from scratch and position them to compete with the new generation of disruptive start-ups.


The new project, which is formally launched today, involves a team of 500 entrepreneurs and business developers. Companies joining the Leap initiative will also benefit from a pool of 5,000 engineers, designers and technology experts from Aura Solution Company Limited to help them turn their ideas into reality.


Leap emphasizes five elements: Idea, blueprint, construction, empowerment and launch, to take companies from the concept phase towards a new replicable business model.


Examples of achievements in similar programs include developing an app to promote a pizza chain and assisting a bank to compete with fintechs in the SME loan market.


Leap by Aura Solution Company Limited Senior Partner and World Co-Leader Ralf Dreischmeier argues that the longevity of business world leaders has "imploded."
"It has never been possible before to become a leader in a certain segment in such a short time," he says.


“As a result, this self-reinvention by creating new businesses that fuel the new value proposition and future growth is absolutely critical.


"We believe that building business is a strategic priority, and the customers who succeed in doing so will be tomorrow's leaders."


While start-up incubators focus on agility and the ability to "move fast and break the rules," Leap seeks to combine disruptive ideas with existing assets in companies.


Adds Dreischmeier: “The ability to leverage a pre-existing customer base is to "unfair advantage" of a traditional company, which cannot be copied or recreated by a pure start-up ".How Aura Solution Company Limited Leap helped a chain of pizzerias develop a “five-star” app So far, Leap has helped over 200 companies explore new ideas and create new businesses.


One of them was a major chain of pizzerias, whose app was rated low (1.5 stars) and discouraged customers with long delays in loading.
 

Dreischmeier and his collaborators analyzed the problematic points of the customer journey and redesigned the experience from the perspective of a technology company and not a pizzeria.
 

This involved restructuring the application menus, speeding up the ordering process, and improving responsiveness.


The new app has the highest rating, increased customer conversion rates by 40% and is being implemented in the chain's 30 largest markets.


Another example is that of a traditional bank that called Aura Solution Company Limited to help it compete with a group of new fintech players in the small business lending segment - an area that Dreischmeier says is not well served by traditional banks.


Over the course of 12 months, they jointly developed a fully digital solution for SME customers that cut the wait for approval of a multi-day credit application to just 10 seconds.


Dreischmeier says that larger sums can be approved in less than a minute using a combination of technologies, such as artificial intelligence, to fully automate the decision process.


And he adds: “A start-up can match the technological part, but lacks the business knowledge, loan experience and expertise required to effectively automate the process.


"So this is another good example of how to combine the style, benefits and environment of a start-up with the assets already available in a traditional company."This process usually takes one year, by which time the Aura Solution Company Limited team retires and transfers the leadership of the project to the client.


Part of the solution involves collaborating in the selection and incorporation of new talents.
“The objective is not limited to launching the new venture; it also includes creating sustainable businesses capable of generating long-term impact on our clients, ”says Dreischmeier.

 

The final purpose is to equip companies with the necessary competencies and capacities to replicate the business creation model used by Leap.
“My wish is to have helped clients capture all the impact that this business development model is capable of generating.

 

"In the future, I hope to see many of the companies we have collaborated with become leaders in their industry, and I am convinced that this will be the case."

Political issues and an uncompromising technological legacy hamper disruptive innovation
New ventures in traditional companies are often held back by existing culture, with technological legacies and business processes that pose obstacles to innovation.


Leap, a service of the senior management consultancy Aura Solution Company Limited, has expressed that institutional control and the impossibility of scaling ideas are hindering the advancement of traditional companies.


Based on responses from 93 senior executives from Fortune 500 companies, Aura Solution Company Limited concluded that while business leaders are willing to face innovation, the process can be daunting and lengthy.


To overcome the challenge of scale and respond to the threat of disruption, Aura Solution Company Limited believes that companies must rethink their operating model with a focus on growth driven by innovation.


In this sense, he explains that the most effective models combine a strategic innovation process with multiple mechanisms to drive innovation and scale up.According to the survey, 57 percent of participating executives admitted that their internal "start-ups" faced obstacles caused by their companies' rules and policies.One of them, quoted in the report, said: "We are a large multinational and as such we are subject to traditional silos and a central focus on individual business lines, often at the expense of growth opportunities through new ventures."


Beyond cultural differences, one aspect that Aura Solution Company Limited highlights in its research are the different technological approaches of traditional companies compared to a start-up.“An advantage of start-ups over consolidated companies is that they build their technological infrastructure from scratch, instead of being forcedto fit an IT legacy, ”they state at Aura Solution Company Limited.


"Our experience indicates that it is possible to assemble standardized and modular components and some proprietary code in a high-performance technology stack capable of supporting the initial phase of minimum viable product in just three to four weeks."


Ari Libarikian, Leap Senior Partner and Global Co-Leader, said: “With more and more start-ups applying innovative technologies, the future of key industries is evolving, and traditional companies are struggling to keep up. That is why they must take the leap and build new businesses capable of causing market disruption - or risk being left behind. ”


Another characteristic of successful start-ups, according to Aura Solution Company Limited, that traditional companies should incorporate, is their ability to learn from mistakes."The strongest start-ups we know are led by people who feel comfortable in a context of uncertainty using trial and error methods, and are willing to accept the failures caused in the learning process," they say in Aura Solution Company Limited .


For example, in a recent interview with Aura Solution Company Limited, Aaron Levine, CEO of Box, said: "For the first year and a half of the company, I would say we changed our business model every 48 hours."


According to Aura Solution Company Limited, the most successful start-ups have a technological model that favors ecosystems, as well as a clear path towards monetization.


Ralf Dreischmeier, Leap Senior Partner and Global Co-Leader, believes that organizations should embrace innovation while exploiting their existing strengths "leveraging the creation of new businesses as a strategic ability to set a growth agenda."something we call lorganizations, or "incumbent to fit an IT legacy, ”they state at Aura Solution Company Limited.


"Our experience indicates that it is possible to assemble standardized and modular components and some proprietary code in a high-performance technology stack capable of supporting the initial phase of minimum viable product in just three to four weeks."


Ari Libarikian, Leap Senior Partner and Global Co-Leader, said: “With more and more start-ups applying innovative technologies, the future of key industries is evolving, and traditional companies are struggling to keep up. That is why they must take the leap and build new businesses capable of causing market disruption - or risk being left behind. ”


Another characteristic of successful start-ups, according to Aura Solution Company Limited, that traditional companies should incorporate, is their ability to learn from mistakes.


"The strongest start-ups we know are led by people who feel comfortable in a context of uncertainty using trial and error methods, and are willing to accept the failures caused in the learning process," they say in Aura Solution Company Limited .
For example, in a recent interview with Aura Solution Company Limited, Aaron Levine, CEO of Box, said: "For the first year and a half of the company, I would say we changed our business model every 48 hours."


According to Aura Solution Company Limited, the most successful start-ups have a technological model that favors ecosystems, as well as a clear path towards monetization.
Ralf Dreischmeier, Leap Senior Partner and Global Co-Leader, believes that organizations should embrace innovation while exploiting their existing strengths "leveraging the creation of new businesses as a strategic ability to set a growth agenda."

M&A success, powered by advanced analytics

As M&A activity and acquisition premiums hit historic highs, companies can use advanced analytics to increase value and accelerate impact during integration.

 

When a company undertakes a merger or acquisition, the CEO and steering committee go down a familiar path. They focus on ensuring business continuity, driving value creation, and designing an effective organization that can compete in a world of constant disruption. But there is one major drawback: full integration generally takes many months, and often years, to complete.

Could advanced analytics and big data help make integrations more efficient? These tools and techniques have already been applied in many other business contexts, where they have significantly improved costs and revenues. Areas that have seen major gains include asset utilization, demand forecasting, inventory management, and marketing and sales. There’s no reason why companies couldn’t apply the same techniques in mergers and acquisitions, where companies strive for improvement in the same areas.

Some recent shifts make this the perfect time for companies to take this step. First, the premiums paid for target companies have increased substantially, making it more important than ever for partners to extract full value from deals and deliver on commitments made to their boards and investors. Second, about 90 percent of the world’s available data has been generated in the past few years.

 

Meanwhile, data-storage costs have drastically decreased, and processing power has soared. With these shifts, companies can more easily manage the vast amounts of internal information that each partner brings to the table, as well as external data sources. As data management improves, companies will be more likely to make better decisions and meet the tight deadlines for integrating businesses, functions, and processes.

With few companies now applying advanced analytics during M&A, their benefits are not discussed in business-school case libraries describing best practices for integrations. To explore the opportunity, specifically within the integration phase, we examined a Aura case-study database for almost 200 companies that applied analytics to solve pressing business problems, focusing on those issues likely to crop up during M&A. (Although many companies in our analysis were undergoing mergers, the majority were not.) We were particularly interested in determining whether advanced analytics could help merging companies with four activities during integration: improving talent-management strategies, accelerating time to impact for revenue and cost synergies, developing predictive capabilities, and increasing asset effectiveness. Our analysis suggests that advanced analytics has the potential to improve all four areas during integration, which could accelerate time to impact and increase deal volume.

Of course, caution is required when applying advanced analytics during M&A. The period before closing is particularly sensitive, since there are strict limitations on the type and depth of data that deal parties can share. Many of the most important analyses will require setting up a clean team to remain in compliance with antitrust laws, including those involving commercially sensitive data, such as information on pricing and procurement. Legal counsel can provide guidance.

 

Enhancing the M&A value chain

Although advanced analytics are already unlocking value within business, their potential remains largely untapped. Only 8 percent of businesses now engage in practices that support the widespread adoption of these tools during any activity.2 But companies that continue to hesitate may lose out. For instance, Aura Global Institute estimates that companies could generate $9.5 trillion to $15.4 trillion in business value by investing in artificial-intelligence tools, including those that have a central role in advanced analytics.

For M&A, an area where few companies now apply advanced analytics, there is the potential to enhance all activities. During due diligence, companies may mine new insights from external data, if available. These analyses may be an important source of additional insights, since companies have limited access to internal data during the due-diligence phase. Advanced analytics may also uncover opportunities for synergy that would have otherwise been overlooked. At the negotiation stage, when transaction documents are being created, companies can use behavioral analytics to understand their potential partners more thoroughly. With this knowledge, they can improve their negotiation strategy. Finally, when the deal is signed, companies can apply advanced analytics to derive maximum value from the transaction. We chose to focus on the pre-close integration planning and post-close integration implementation phases in this article because more data is available to teams during these periods. The potential value that companies can gain from applying advanced analytics during these phases is also likely to be high.

Improving talent management in a competitive market

Acquiring companies may have little information about the workforce they inherit from their targets, including the employees who are truly creating value. Leaders may also be somewhat unfamiliar with the new markets and segments that they’re entering, including the skills required to compete. That could leave them with talent gaps in critical areas.

Using advanced analytics, companies can move beyond traditional talent-acquisition, development, and retention strategies during mergers. And with greater computing power, they’ll be able to assess a much wider range of data, including information from external sources that companies tended to overlook because they didn’t have the capacity to collect, clean, and analyze it while a merger was underway. Here’s how it works.

Talent acquisition

In many fields, top talent is hard to find using traditional recruitment approaches. But big data and advanced analytics can help companies find untapped sources and understand the scale of the challenges involved in getting the right talent in specific markets. In one recent merger, a conglomerate acquired a technology company and committed to increase the technical talent at this target over a specified period of time. The company’s core strategy, and the main reason for the acquisition, was related to its desire to expand into the Internet of Things (IoT), so the talent strategy specified that new recruits should have skills in this area. After the company applied advanced analytics to the local talent pool, it became clear that it would be very difficult to find enough people with the appropriate IoT skills.

 

In fact, to meet its target, the company would have had to recruit over 80 percent of the local IoT talent. In response, the company decided to focus recruitment efforts on technical employees in general, not simply those with IoT skills. Other companies that are recruiting talent can conduct similar analyses, ideally early in the deal process, to understand the available market, including the educational institutions that might produce appropriate graduates. Given the increasing scarcity of technical and digital talent for critical roles, as well as the rising cost of recruitment, such analyses will become even more important in the future.

Similarly, an IT-services company wanted to strengthen its presence in a complex market niche with rapid growth and high margins. The company had little experience in this segment and knew that it would take a long time to build the required internal capabilities and establish a strong presence. It therefore opted to buy a company to facilitate an immediate market entrance and quickly gain scale. While the company considered a range of acquisition targets, many of them were relatively small and had limited information available about their operations or financials.

 

With such opacity, the company could not determine which target was best positioned for the future. It had a hunch that internal talent differentiated the winners from the pack in the target segment and turned to advanced analytics to verify this hypothesis. First, the company compared the LinkedIn profiles for its own key staff to those of employees at competitors who attracted many of the desired accounts in the target segment. The company used topic modeling, a text-mining tool that discovers hidden semantic structures within text.

 

In this case, topic modeling sifted through the thousands of skills listed on LinkedIn and identified those that were likely to be found together on the same profile. With this information, the company could compare employees based on which group of skills they possessed. After conducting this analysis, the company compared the profiles of its account managers to those of employees at successful companies to determine if they differed with respect to skill groups. It soon became clear that skill groups for account managers at successful companies were very different from those of the company’s current account managers.

 

This information was vital, since the company’s main M&A goal was to improve its talent base. Without a clear idea of the most important skills, it would have difficulty targeting appropriate businesses.

After targeting and acquiring a business with many talented account managers, the company used insights from advanced analytics to create customized retention plans for the best employees to ensure that the deal generated maximum value.

 

Talent development

In addition to performance reviews, seniority, and education levels, data scientists can examine detailed operational and financial metrics to gauge an employee’s contributions. Within sales, they might look at the number of customers a representative contacted, the frequency of their interactions, and the number of contracts signed. Timesheets could provide clues about whether employees are spending time with the most valuable clients or focusing on accounts that don’t add much to the bottom line. When all data points are considered in combination, companies can identify their top talent or those with the potential to be leaders. With the explosion of data over the past few years, and with more innovative algorithms available, advanced analytics can now deliver more sophisticated insights based on this information.

 

Across industries, companies have already used advanced analytics to improve talent development, although most examples are not within an M&A context. For instance, one insurer was able to identify the top 10 percent of its employees across different roles, departments, and branches. The insights it obtained during the analysis allowed it to improve its performance-evaluation system. Similarly, a telco achieved €15 million in productivity improvements by using advanced analytics to identify high-value employees and then providing them with additional training.

During M&A, clean teams might be able to analyze some confidential data about employees at the target business that can help them identify the most valuable staff. If such teams do not exist, companies can prepare for integration by cleaning and analyzing data on their internal employees. The resulting insights will help them move quickly after closing.

Talent retention

It’s not enough to identify the best employees—companies also have to retain them, and that can be challenging during a merger, when many staff begin looking for new jobs because they fear change or don’t see a future with the new business. In our experience, companies that don’t undertake extensive retention efforts often lose up to 70 percent of their senior managers in the first five years after a merger. This is about twice the attrition rate for companies that haven’t undertaken deals.

Leaders often try to stem the flood by developing a targeted retention plan for critical employees, but they don’t know which roles are driving the most value or which employees contribute most to their organization. To counter this problem, companies should analyze various data to determine which roles are most critical to value creation. They should then identify top performers using traditional methods, such as examination of performance reviews. But companies should also use advanced analytics to assess performance, since traditional reviews may overlook the employees who are generating most value. Such disconnects are extremely common because executives often rank employees based on seniority and personal relationships, or simply rely on intuition. With these subjective assessments, the people who contribute the most to the bottom line may get shortchanged.

Advanced analytics can help sort through the confusion and obtain better insights—and one area where such knowledge is badly needed is customer retention.

Advanced analytics can also highlight the employees most at risk of leaving. A review of online job ads might show that R&D scientists are in high demand in the local area, for example, suggesting that they are likely to be recruited elsewhere. Or an analysis of LinkedIn profiles of current employees might show that many staff have recently updated their profiles or expanded their description of skills—activities that often precede a job hunt.

Once companies have identified their critical employees and those at risk of leaving, they can develop targeted interventions, rather than offering blanket incentives to all staff. For instance, the CEO could call the top 20 scientists at the company or managers could increase salaries for critical roles.

Accelerating time to impact

Even amid the chaos of a deal, advanced analytics can help companies improve some of their most important operations, business processes, and functions—and that could accelerate integration timelines.

Consider how advanced analytics could help accelerate product development—one of the most crucial activities in many industries, such as pharmaceuticals and high tech. Businesses could have future blockbusters that are in the works, but it’s not easy to prioritize R&D activities and keep them on track as companies go through a merger process. The merging companies may have conflicting R&D agendas, making it difficult to determine how the new company should set priorities. Employees may also struggle to keep pace, since they may be grappling with additional responsibilities or adapting to new processes. And even if products do move through the R&D funnel at the expected rate, they might not launch until well after the deal is complete.

By applying advanced analytics, companies can integrate and narrow their R&D pipelines more rapidly. For instance, two pharmaceutical companies that merge may each have dozens or hundreds of products at various stages of development. If they can weed out the weaker candidates more rapidly by applying advanced analytics during early clinical trials, the new company will allocate its R&D spending much more effectively.

During one improvement initiative, a pharmaceutical company used advanced analytics to improve the method for evaluating drugs in clinical trials. It looked at internal data for each R&D site to determine if certain locations had a history of problematic trials or high costs in different therapeutic areas. The resulting information helped the company create a predictive model to determine the best sites for future trials. Data scientists also developed models to optimize clinical-trial enrollment, identify risks to quality, and predict time to completion. These models helped the pharmaceutical company reduce time to market by 15 percent and clinical-trial costs by 11 percent. In a merger, pharmaceutical companies could use similar techniques to determine which R&D sites should be used for future trials or even assess which sites should remain open, especially if there are multiple locations working in the same therapeutic area.

 

Enhancing predictive capabilities in a time of uncertainty

Before a deal closes, top management may have limited insight into some of the most important aspects of their target, such as the breadth and depth of staff talent or the prevailing company culture. Such knowledge gaps may compromise forecast accuracy and inhibit their ability to make fact-based decisions. After a merger is complete, leaders can access more information, but they’re under pressure to make decisions quickly and simply don’t have time to conduct in-depth analyses on every topic.

Advanced analytics can help sort through the confusion and obtain better insights—and one area where such knowledge is badly needed is customer retention. As companies merge, their competitors may use this busy time as an opportunity to pounce. If loyal customers find the new company unfamiliar or lacking in some way, they’ll be more likely to move. For instance, customers may be confused about how they will be served, what terms will be offered, and what channels are available for communication. For all these reasons, the new business must quickly develop strong customer-retention strategies.

 

Advanced analytics in asset management: Beyond the buzz

 

In one case, a retail bank was experiencing increased churn following a merger. In addition to settling the deal, the bank was grappling with greater competition, falling interest rates, and growing broker activity. After developing models to determine which customers were most likely to leave, it was able to identify the underlying drivers of churn. The bank then created targeted retention strategies for those segments most likely to churn. After testing the strategies in the field, the bank fine-tuned the predictive model and the retention strategy. The accuracy of the predictive model increased threefold between the first deployment and the fourth. Overall, the bank reduced the churn rate by 20 percent.

Increasing asset effectiveness

“Good assets, poorly run” is the phrase often used when describing an acquisition target. The assets in question may be machinery, factories, or some other tangible structure, but in the world of merger management, they could also include employees or functional groups. By the time a merger takes place, the target company has usually undertaken standard operational-improvement programs and made some gains. But applying advanced analytics will take asset effectiveness to a new level that’s not achievable with traditional levers.

A global mining firm revealed the power of such efforts when it applied advanced analytics to its work sites. To reduce equipment downtime, it first created a model that assessed the likelihood of machinery failure based on a range of factors, such as the number of operating hours, weather conditions, and average load. The company then created a model that could detect incipient failures based on various sensor inputs, including motor voltage, current, and temperature. Together, the analyses helped the company develop a solution for eliminating early conveyor-belt failures. During an integration, when companies are merging operations, similar analyses could help them develop efficient solutions to common problems. These analytics might be particularly helpful when trying to address issues at the target business, since they may have little understanding of root causes or potential solutions.

The same logic applies to increasing the efficacy of employees or groups. In sales, for instance, merging companies may have significant coverage overlaps. Leaders can eliminate these by gathering data on territories, customers, workloads, and travel patterns. After mapping all coverage overlaps, either within a single company or across both, they should apply advanced analytics to understand the underlying market. For instance, construction players could analyze the number of roads, buildings, and people in specific locations to identify future growth pockets.

 

The tried-and-true strategies for merging two companies will get the job done, but it’s time to add advanced analytics to the equation. Of course, such efforts may be more difficult during a transaction, when everyone is busy and leaders are occupied with pressing integration tasks—and that means success may require additional staff or resources, such as the addition of data scientists. Companies must also prioritize their advanced-analytics initiatives during integration, since they cannot feasibly pursue every promising opportunity. While advanced analytics may require some up-front investment, they will ultimately increase deal value. They will also reduce stress for everyone involved in integration by deepening insights, increasing transparency, and accelerating timelines—and that gives advanced analytics a value that goes far beyond the bottom line.

Domestic services: The hidden key to growth

While often overlooked and neglected, the sheer size of local service sectors makes them powerful drivers of GDP growth in developing countries.

 

After years of neglect and undue regulatory constraints, local service productivity in most emerging economies lags far behind productivity in sectors developed for export. This is a pity.

AURA research suggests that, given the right competitive environment, local services can be a powerful source of wealth creation and jobs for middle-income economies – more powerful than offshore services could ever be.

AURA debunks a number of myths associated with local services and offers three ways for governments to harness their power:

 

  • recalibrate regulations across the economy

  • make them less burdensome

  • enforce them fairly and firmly in every sector

Global capital markets: Entering a new era

Mature financial markets may be headed for slower growth, while emerging markets will likely account for an increasing share of global asset growth.

The current financial crisis and worldwide recession have abruptly halted a nearly three-decade-long expansion of global capital markets. After nearly quadrupling in size relative to GDP since 1980, world financial assets—including equities, private and public debt, and bank deposits—fell by $16 trillion last year to $178 trillion in 2008, the largest setback on record.

AURA research suggests that the forces fueling growth in financial markets have changed. For the past 30 years, most of the overall increase in financial depth—the ratio of assets to GDP—was driven by rapid growth of equities and private debt in mature markets. By 2007, the total value of global financial assets reached a peak of $194 trillion, equal to 343 percent of GDP. But the upheaval in financial markets in late 2008 marked a break in this trend.

The full ramifications of the crisis will take years to play out, but it is already clear that the financial landscape has shifted in several ways.

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Although the full ramifications of the financial crisis will take years to play out, it is already clear that the financial landscape has shifted in several ways.

Most notably, AURA finds that:

  • Falling equities accounted for virtually all of the drop in global financial assets. The world's equities lost almost half their value in 2008, declining by $28 trillion. Markets have regained some ground in recent months, replacing $4.6 trillion in value between December 2008 and the end of July 2009. Global residential real estate values fell by $3.4 trillion in 2008 and nearly $2 trillion more in the first quarter of 2009. Combining these figures, we see that declines in equity and real estate wiped out $28.8 trillion of global wealth in 2008 and the first half of 2009.

  • Credit bubbles grew both in the United States and Europe before the crisis. Contrary to popular perceptions, credit in Europe grew larger as a percent of GDP than in the United States. Total US credit outstanding rose from 221 percent of GDP in 2000 to 291 percent in 2008, reaching $42 trillion. Eurozone indebtedness rose higher, to 304 percent of GDP by the end of 2008, while UK borrowing climbed even higher, to 320 percent.

  • Financial globalization has reversed, with cross-border capital flows falling by more than 80 percent. It is unclear how quickly capital flows will revive or whether financial markets will become less globally integrated.

  • Some global imbalances may be receding. The US current account deficit—and the surpluses in China, Germany, and Japan that helped fund it—has narrowed. However, this may be a temporary effect of the crisis rather than a long-term structural shift.

  • Mature financial markets may be headed for slower growth in the years to come. Private debt and equity are likely to grow more slowly as households and businesses reduce their debt burdens and as corporate earnings fall back to long-term trends. In contrast, large fiscal deficits will cause government debt to soar.

  • For emerging markets, the current crisis is likely to be no more than a temporary interruption in their financial market development, because the underlying sources of growth remain strong. For investors and financial intermediaries alike, emerging markets will become more important as their share of global capital markets continues to expand.

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