Bill Ackman is one of the world's most prolific Activist Investors.
He recently took a significant position in ADP and in mid-August, he laid out his blueprint for the Digital Transformation of the company in a 168 slide presentation detailing how to more than double the stock price.
It's HIGHLY relevant for anyone in the F1000 trying to better understand the business case for Digital Transformation in general and those in any stage of the process looking to take the next step.
Combining a couple statements below from his VERY thorough presentation (did I mention it's 168 slides?), his conclusions about the challenges/opportunities ADP faces are summarized in the 13 bullets below:
- "ADP's historical success has made it a lethargic and inefficient sleeping giant."
- "ADP's focus on 'hitting the numbers' has led to value-destructive decisions with negative long-term consequences."
- "ADP's products and technology need modernization."
- "Why shouldn't the industry behemoth, with vast resources, be the leader in software and technology?"
- "Weak technology offerings, on the front-end and back-end, harm ADP's competitive position and long-term growth and efficiency."
- "Outdated and inefficient Technology + 'service' = less growth and lower margins."
- "While ADP often cites its 'service' as a key differentiator, most of this 'service' is support for product deficiencies."
- "ADP's support teams lack a unified view of the client which hampers their ability to provide a robust client service experience."
- "Properly operated, ADP should produce industry-leading long-term results. ADP should be the ecosystem and partner of choice given its breadth and scale."
- "The HCM industry is rapidly evolving. ADP needs to urgently become an efficient world-class technology company. ADP has enormous upside if it can transition to a REAL technology company."
- "Enhanced technology offerings, on the front-end and back-end, would drive improvements in ADP's competitive position, long-term growth and efficiency."
- "We believe these opportunities can only be captured with an innovative and nimble culture supported by appropriate leadership and investment."
- "Directionally, and on the whole, we think our analysis is correct and the broader conclusions are inescapable."
Needless to say, Carlos Rodriguez, CEO of ADP, doesn't share Ackman's POV and pointed to an impressive stock performance of the past 6 years....
While I'm certainly not in a position to weigh in on "who's right" about where ADP is or isn't in terms of embracing the 4th Industrial Revolution, Ackman is 1000% correct in the business case he presents for Digital Transformation in general and the growth/innovation it unleashes when it's done right.
Given my passion for the space and of course what we do, I also wanted to share a quick roster of implications associated with his business case that should be considered as the "so what?" and its application to your world:
- Culture change is arguably one of the hardest if not the hardest thing to do in business which should NEVER be underestimated
- Calibrating resource allocations between "Business As Usual" (BAU) vs. "Growth/Innovation" is all sorts of "Art + Science"...it doesn't have a beginning or an end aka welcome to the amazing world of embracing the Agile mindset across EVERYTHING you do
- Innovation is the "cousin of creativity" and is fueled by DIVERSITY of experience, perspective and ideas
- Tech is an enabler but keep in mind the massive importance of your people/process aka "your system" as that's what gets you where you want to go...don't forget the Mike Tyson rule and what happens to all that "strategy" when it steps in the ring with Iron Mike (day-to-day reality)...
- Future of marketing/growth revolves around competing on customer experience
- Speed kills, especially when its enabled by tech to drive productivity gains vs "busy work"
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