Adjacencies Evaluation of strategic options Furger and Partner

Adjacencies Evaluation of strategic options Furger and Partner Inc Strategy Development Hottingerstrasse 21 8032 Zurich Fon +41 44 256 80 70 Fax +41 44 256 80 79 Mail furger@furger-partner. ch www. strategy. app

Adjacency is defined as the distance to the core business Distant Adjacencies Middle Adjacencies Close Adjacencies Core Business 2 www. strategy. app The closer a target is to the core business, the better; due to the following factors - Learning curve effects - Reduced complexity - Speed - Strategic clarity - Ability to drill down Adjacency logic requires a strong and clearly defined core business There are six primary adjacencies to expand a strong core business - Product adjacencies - Geographical Adjacencies - Value Chain Adjacencies - Channel Adjacencies - Clients Adjacencies - New Business Adjacencies

Core business as a basis for expansion opportunities Regions Channels Customer Groups Value Chain Core Business Competencies and Assets Customers, Products and Technologies Differentiation from the competition Products 3 www. strategy. app Technologies

Adjacencies are defined for the existing core business Outsourcing Local Backward integration New Competences New regions Forward integration International/Global New stages in the value chain Internet Distribution New Substitutes New distribution channels CORE New Business Units Direct New Business Models New customer segments Existing segment – microsegmentation New Products Existing segments – not penetrated yet Novelties New segments 4 www. strategy. app Next generation Support Services Complementary products

Criteria for the evaluation of adjacencies Criteria 5 Definition Rating scale for the distance to success 0 1 2 3 Customer groups How different are the target customers compared to existing customers? Same customers Similar customers New customers Total new and unknown customers Customer problem How close is the customer's need to the existing or known customer problems? Same customer problem Similar customer problem New customer problem Total new customer problem Region How close is the target region to the current market regions? Same regino Close or similar region Different regions Total different / far away region Product / Service How high is the degree of innovation of the new product compared to existing products? same product Similar product New product Total new product Technology How new is the technology in relation to known and proven technologies of the company? Same technology Similar technology New technology Total new technology Distribution channel Can existing channels be used or must new channels be created? Same distribution Similar distribution channel New distribution channel Total new and unknown channels Value chain How close is the activity in the value chain to other offerings? Same part of the value chain www. strategy. app Adjacent part of the value chain Distant part of the At the other end value chain of the value chain

Criteria for evaluating the distance to success Criteria Definition Quantity and value of the target Market volume market today (value in €, actual values in year …) to be discussed Revenue Value of existing revenue in the target market – value per year in real terms Time until first Estimated time in years to reach first revenue in the target market Competition Market is already occupied by competitors Substitution of Are existing products / offerings being existing substituted by the new strategic option products 6 Investments Financial resources / investment needed Know how needed / people / specialists www. strategy. app Rating scale of valuation for distance to success 0 1 2 3 High market volume >1. 000 Mio. € Medium market volume 200 – 1000 Mio. € Small, but growing market 20 -200 Mio. € No existing market 0 Mio. € High revenuehigh growth rate Medium revenue Small revenue No actual revenue Already revenue started 1 year 3 years > 5 years Existing competitors Competitors for similar products Competitors about to enter No competition visible Substitution by higher customer benefit Substitution by other different application Substitution possible New product and new technology / not proven yet No investment Low investment Investment High investment People available Some know how to be build up Know how to be acquired All know how to be acquired

Search for growth options(I/II) Customers Regions Channels Existing ■ … ■ … New - possible ■ … ■ … www. strategy. app

Search for growth options(II/II) Competences Products Value Chain Existing ■ … ■ … New - possible ■ … ■ … www. strategy. app

Assessment of the option : ………… Distance to success Criteria Description Value Criteria Market volume Customer group Revenue Customer problem Time until first revenue Competition Substitution of existing products 9 Adjacency Region Product / service offering Technology Distribution channel Investments Value Chain Total distance to success Total value of adjacency www. strategy. app Description Value

Evaluation of the options according to two dimensions: Growth through diversification New ideas Adjacency to core business high Quick Wins low www. strategy. app Distance to success Expansion of core business high

Bundling of options to strategic directions high Growth through diversification New ideas Adjacency to core business 2 1 5 3 4 7 6 Quick Wins low www. strategy. app Distance to success Expansion of core business high

Your contact Ignaz Furger and Partner INC Strategy Development Hottingerstrasse 21 CH – 8032 Zurich Fon +41 44 256 80 70 Fax +41 44 256 80 79 Mail furger@furger-partner. ch www. strategy. app