I. EXECUTIVE SUMMARY
A telecommunications services company faced a strategic roadblock: declining growth in its core market, required cash distributions as an ESOP, and limited business development experience. With Newport’s help the company identified an attractive new market by rigorously identifying and evaluating options, and clearly defining where it had the best opportunity to win.
II. INTRODUCTION
- The company ($60-$80 million revenue) started over 30 years ago as a satellite TV installer, the 2 owners working out of a garage. Family members became employees, and later key leaders as the business grew across 8 states. The keys to success were disciplined operations of field technicians deployed to serve customers, and devoted customer service.
III. BACKGROUND
- The company (family-owned, now in an ESOP structure) provides home satellite-based telecommunications installation and maintenance services to rural customers, an industry that grew 21% per year until 2015.
- This satellite services market has been declining 3%- 5% annually since then, because of competition from fiber networks and cellular services
- The company’s owners and CEO recognized this structural challenge and developed related businesses (communications cable manufacturing and cloud-based software) to achieve revenue diversity. But these businesses failed to grow enough to stem the revenue decline in the core satellite business.
- The CEO also faced regular cash demands to pay debt interest and make required distributions to ESOP owners/company employees
- The CEO and owners felt they had a runway of several years to address these challenges, but then revenue declined 12% in 2023. Was this an anomaly or a new normal?
- They recognized the need for action – now
IV. CASE EVALUATION
- Owners recognized the need to identify one or more new businesses with more compelling growth potential and attractiveness.
- The company had significant operating expertise, successfully mobilizing several hundred technicians each day to install and service home satellite systems. But business development experience was lacking as a core skill because sales and marketing was conducted by the satellite systems manufacturer.
- Some market growth ideas were identified, but the owners and CEO wanted to implement a rigorous, structured process to identify and evaluate a wide range of possibilities that fit their business model and market expertise. A key imperative was to create a process that was comprehensive and inclusive but fast and nimble so as not to take months in the implementation and development.
V. PROPOSED SOLUTIONS
- The client engaged Newport to develop a strategic process structured as a series of three creative workshops conducted over five weeks. The participants included owners, senior leadership team members, and employees who would likely take leadership roles during implementation.
- The objective of the strategic process was to clearly articulate a 5-8 year forward vision of the company that honored its family-based culture while recognizing the need to stretch beyond current capabilities and markets.
- We employed and adapted planning tools such as After Action Reviews to capture lessons learned from previous business development efforts, competitor and market analysis, identifying key differentiators, and assessment of business trends.
- Critically, the team developed criteria they would use to identify new business opportunities. These criteria included minimum addressable market size, market growth rate, competitive structure, required technical skills, geographic footprint, and service model.
- Through this process, the team identified 84 business opportunities that were consistent with the above criteria and the forward vision. The 84 ideas came from team members, Newport Partners, experts within Newport’s national network, third party research, and ChatGPT.
- The original 84 ideas were refined to 4 target markets using a rigorous analytical prioritization process. Prioritization involved giving each idea a market attractiveness and risk score, incorporating subjective factors, then ranking ideas.
- After the workshops, the 4 markets were narrowed to 1 target market by interviewing industry experts and potential customers, and conducting further market analysis. The chosen target market is in the electrical services sector – installation of electrical infrastructure for new construction projects. This market demands the capabilities the company has already mastered: operating expertise deploying electrical technicians to work sites, highly developed processes to identify and train technical talent, and dedicated customer service.
- A comprehensive implementation plan was developed. Job one was hiring an experienced industry leader with an extensive customer network. Defining the channel to market, developing a sales plan and branding campaign, reconfiguring existing vans, and documenting operational procedures were key early actions.
VI. EXECUTION AND RESULTS
- Within 8 months, the company staffed and funded a team (internal and external leaders) who successfully championed and launched the new business. Year one was breakeven. Year two has a significant backlog of profitable work and a $3 million revenue target, with a clear pathway to revenue of $15 million over the next 2 years.
- Simultaneously, the CEO and his leadership team identified cost reduction and efficiency actions to allow its core business to stay cash flow positive as topline revenue continues to decline.
- The company is now running its legacy business to achieve target cash levels while launching the new electrical services business in a high growth market. Given this success, the company is confident it could also launch a second new business.
- The new business’ contribution to revenue, margins and EBITDA are evaluated at each quarterly company Board meeting, and monthly by the CEO and his team to align KPIs and take corrective action if required.
VII. CONCLUSION
- New market and business opportunities abound, but they should fit within the skills and capabilities of the business, so as to enhance and not detract from ongoing operations.
- Think about implementation (how will this get done, who will do it, what will it cost, what are the opportunity costs, what might it mean to ongoing business, etc.) before starting the strategic planning process.
- Put a broad mix of people in the room, not only the senior folks, so as to gain a wide range of perspectives, ideas, insights and observations.
- Reach far and wide for ideas. Don’t be limited by who’s sitting in the room.
- Use tried and true planning tools, and adapt them to your unique needs.
- Build the team’s confidence with success. Challenge team members to learn new skills while reaching out to experts to fill gaps.
- Don’t be afraid to move quickly. Short strategic planning processes done regularly and efficiently eclipse annual multi-day marathon sessions that are out of sync with fast moving market changes.
Unlike traditional planning methods that often bog teams down in analysis paralysis, Newport’s agile approach moved the team from insight to action in under 6 weeks—uncovering 84 market opportunities and narrowing to one scalable new business.
