Author: Tom Koor

Tom Koor

Do you need to transform your company? V4

Do you need to transform your company? V4

 What is the purpose of this article?

Enable the board of directors, C-Suite, investors, and founders to understand whether there is a need to transform the company.

This article does not provide tax, legal or financial advice.

You must do your own research and fact-based analysis using current and relevant information.

You can download a PDF of this article from: https://koorandassociates.org/wp-content/uploads/2025/05/do-you-need-to-transform-your-company-v4.pdf

What are the critical learnings in this article?

  • Many business leaders think that they need to change the direction of their company, in order to be financially viable.
  • Transforming while ahead of the competition is more successful than transforming when you are forced to.
  • Cost cutting is not the solution to under performance.
  • If your company is underperforming, compared to the competition, determine what changes are required to the board of directors and C-Suite,
  • Often the board of directors and C-Suite do not know that their company is in crisis or heading toward crisis.

Global CEOs recognize that there’s a good chance their companies will not survive.

  • In 2023, 45% of global CEO thought that their company would be financially viable for 10 years or less, if it kept running on its current path.1
  • In 2024, four in ten CEOs believed their company will no longer be viable in ten years if it continues on its current path. The majority of CEOs believed they will not be in their current role in five years time. 2

Transforming while ahead of the competition is more successful than transforming when you are forced to.3

  1. Transforming while SR (Total Shareholder Return) matches or exceeds industry averages creates significantly more return in both the medium and long term, compared to transforming when you’re behind industry averages.
  2. At any point in the past 20 years, 30% of companies are significantly underperforming their sector but only 25% of transformations will result in outperformance in the short and long term.

Cost cutting is not the solution to under performance. 3

  • Long term *five year) value creation TSR out performance is due 43% to revenue growth and 32% to successful (note the world SUCCESSFUL) cost reduction.

What did the analysis of 4,446 CEOs in 2021 reveal about the impact of consumer trust?4

  • Consumer trust and company performance are linked. Consumer trust is the second biggest determinate of performance variance, after industry conditions.
  • Most business leaders have little understanding of their consumers. 87% of business leaders said consumers highly trust their company. 30% of consumers said they highly trust.

 What are the symptoms of a need for transformation?

The obvious facts demonstrate that the company is in crisis. E.g.

  • Losing customers or losing market share. Net Promotor Scores dropping.  Customer churn increasing and customer retention decreasing. The lifetime value of customers is exceeding customer acquisition costs.
  • Benchmarked performance is poor compared to competition.
  • Debt and interest payments are causing major losses and negative free cash flow. The company is profitable with positive free cash flow, if debt and interest payments are not considered.
  • The company is unprofitable with negative free cash flow, even if debt and interest payments are not considered.
  • Employee turnover is unacceptable.
  • Employee ratings of the company are unacceptable.
  • Potentially valuable employees are not applying or accepting offers.
  • The overall market size is shrinking.
  • Not being able to meet payroll in the short-term or meet covenant requirements in financing.

Often the board of directors and C-Suite do not know that their company is in crisis or heading toward crisis.

  • No ongoing monitoring and analysis of: the number of customers or market share, the Net Promoter Score, customer churn and retention; lifetime customer value and customer acquisition costs.
  • No benchmarking relative to the competition.
  • No free cash flow forecasting and related scenario analysis
  • No monitoring and analysis of employee turnover.
  • No monitoring or analysis of employee ratings.
  • No forecasting of long-term ability to meet payroll or meet covenant requirements in financing.
  • No monitoring and analysis of the market size i.e. the number of customers with urgent problems and needs who are willing and able to pay for the company’s solution.
  • No scenario planning.
  • No challenges from external advisors, consultants, and experts.

What is the root cause of the need for transformation?

The leadership talent (i.e. the board of directors and C-Suite) is the root cause of the need for transformation.

The leadership talent may not know what skills, experience, and knowledge they personally need in order to:

  • Continuously evolve the company to keep pace with customers, users, and the overall ecosystem.
  • Identify if the company is heading towards crisis, as noted above in the section regarding not knowing if in crisis
  • Avoid decisions which can result in crisis.

Your next steps

  • Define the words/concepts you’re using, in a glossary. I’ve seen major confusion when the same words mean different things to different people.
  • If your company is matching or exceeding your industry peers, determine how transformation can maintain or increase your lead. In today’s hyper competitive world, your competition is changing.
  • If your company is underperforming relative to your competition, first define the talent characteristics of a board of directors and C-Suite that would outperform the competition. Then assess your current board of directors and C-Suite relative to those characteristics.
  • Determine whether or not your company is in crisis or heading towards crisis.

Footnotes

1 PWC’s 27th annual global CEO Survey

https://www.pwc.com/gx/en/ceo-survey/2024/download/27th-ceo-survey.pdf

2 PWC’s 28th annual global CEO Survey

https://www.pwc.com/gx/en/issues/c-suite-insights.html

3 Bain, April 12, 2024 “Five truths (and one lie) about corporate transformation”

https://www.bcg.com/publications/2024/five-truths-and-a-lie-about-corporate-transformation

4 PWC Strategy + Business, “Translating trust into business reality”

https://www.pwc.com/gx/en/issues/trust/translating-trust-into-business-reality.html

What further reading should you do?

  • What is business transformation?

https://koorandassociates.org/business-transformation/what-is-business-transformation/

  • Is your company planning to fail?

https://koorandassociates.org/avoiding-business-failure/is-your-company-planning-to-fail/

  • Do you understand your customers?

https://koorandassociates.org/understanding-customers/do-you-understand-your-customers/

  • How do you succeed with transformation?

https://koorandassociates.org/business-transformation/how-do-you-succeed-with-transformation/

Tom Koor

What is business transformation? V3

What is business transformation? V3

What is the purpose of this article?

This article enables shareholders, the board of directors, C-Suite and others to discuss business transformation.

This article does not provide tax, legal or financial advice.

You must do your own research and fact-based analysis using current and relevant information.

You can download a PDF of this article from: https://koorandassociates.org/wp-content/uploads/2025/05/what-is-business-transformation-v3.pdf

What are the critical learnings in this article?

  1. There is no commonly agreed upon standard definition of business transformation.
  2. Your company must create your own definition and criteria for what is business transformation, which everyone understands.

What are some definitions of business transformation?

#1 “Transformation is about improving performance, not just cutting costs. Companies boost the odds of achieving breakthrough results when they simultaneously improve their operating discipline and make portfolio moves that collectively redefine their business.”1

#2 “Transformation spans your entire organization, to address all the changes needed to reach your full ambition. “2

#3 “…rapid, visible, and sustainable step-change improvement in business performance; strengthen their organizations to win in the future; and turn their companies’ upside potential into radical performance gains.” 3

#4 “Business Transformation is the process of fundamentally changing the systems, processes, people and technology across a whole business or business unit, to achieve measurable improvements in efficiency, effectiveness and stakeholder satisfaction. As such, a business transformation project is likely to include any number of change management projects, each focused on an individual process, system, technology, team or department”4

#5 Business transformation has three categories of effort:5

  1. Operational: Do what you are currently doing, better, faster, or cheaper
  2. Core transformation: do what you are currently ding in a fundamentally different way e.g. Netflix changing from sending DVDs through the mail to streaming video.
  3. Strategic – Change the very essence of the company e.g. Amazon from retailing to cloud computing services.

#6 Transformation is described in terms of the changes to the company’s business model. The business model describes how a company creates value for itself while delivering products or services to C&U (Customers and Users). 

There are 9 components to the business model:

  1. Target C&U segments
  2. C&U value proposition
  3. C&U relationships
  4. Channel
  5. Key partners
  6. Key resources
  7. Key activities
  8. Cost structure
  9. Revenue streams

Each type of transformation is described in terms of changes to the three critical customer components of the business model and other business model changes.

  1. Who are the target C&U segments?  Who exactly is the company creating value for? What are the geographic, social, and demographic characteristics of each C&U segment? What is the market size?
  2. What is the value proposition of each target C&U segment?  A value proposition is the C&U perception of value i.e. All of the C&U perception of achieved benefits vs all of the C&U perception of incurred costs.  Benefits may include: financial and non-financial e.g. time savings, convenience, status, etc.  Costs may include financial (purchase costs, costs to switch, other adoption costs, ongoing costs) and non-financial (e.g. time, inconvenience, loss of status, etc.)
  3. C&U relationships.  What type of relationships do C&U expect to have with the company?

Customer needs, the competition, technology, the economic and political climate are constantly evolving and changing.  Successful companies understand the outside world and evolve as the world around them changes.

Transformation becomes an issue when the company’s leadership no longer understands the outside world, makes decisions in this isolation, and then has a crisis.

There are five types of transformation. A company may be undergoing more than one type of transformation at the same time.

#1 Restructuring

  1. Target CU& segments: The company remains focused on the same (or subset) of target C&U with the same set of problems and needs.
  2. C&U value proposition: The value proposition perceived by C&U is little changed.
  3. C&U relationships:  Limited changes to C&U relationships
  4. Other business model changes: The actions taken have a financial focus: reducing debt, selling assets, reducing the number of C&U (Customers and Users), reducing unprofitable C&U, reviewing all components of the business model to reduce debt and costs, selling pieces of the company, etc.

#2 Turnaround

  1. Target C&U segments: The company remains focused on the same (or subset) of target C&U with the same set of problems and needs.
  2. C&U value proposition: Focus on fast major improvements to the perceived value proposition.
  3. C&U relationships: Focus on fast major improvements to the C&U relationships.
  4. Other business model changes: Changes necessary to support the value proposition and relationship changes.

#3 Operational Transformation

  1. Target C&U segments: Focused on the same (or subset) of target C&U with the same set of problems and needs.
  2. C&U value proposition: The value proposition perceived by C&U is little changed.
  3. C&U relationships: The C&U may expect major changes to their relationships with the company e.g. move from in-person to mobile app.
  4. Other business model changes: Components of the business model are improved by a large factor e.g. 10 times.

#4 Business Model Transformation

  1. Target C&U segments: The focus is still on the same C&U, but their problems and needs have fundamentally changed.
  2. C&U value proposition: The solution perceived by the C&U requires fundamental change.
  3. C&U relationships; The C&U expect fundamental change in their relationships with the company.
  4. Other business model changes: Most or all components of the business model require fundamental change. 

#5 Strategic Transformation

  1. Target C&U segments: There are new C&U with new problems and needs requiring a new business model.  Think of Google.  It started out to be the best search engine.  Now Google produces the Android operating system, smart phones and has been working on driverless cars.
  2. C&U value proposition: These new C&U will have different value propositions than those for existing C&U.
  3. C&U relationships: A strategic transformation is basically creating a new company.
  4. Other business model changes:

What are potential measures of transformation outcomes?

  1. Customer perception e.g. NOS (Net Promoter Score), Customer Satisfaction, Customer perception of competitively differentiated value proposition)
  2. Customer behaviour e.g. Retention, Market share, spending per customer
  3. Employee perception e.g. Employee satisfaction, employee engagement
  4. Employee behaviour e.g. % of desired hires who accept, retention/turnover
  5. Company operational e.g. productivity measures, elapsed time for tasks.
  6. Company financial e.g. Return on investment
  7. Shareholder e.g. perception, total shareholder return
  8. Partners and suppliers e.g. perception, ease of doing business, revenue and profit.
  9. Regulators e.g. perception and compliance reports
  10. Politicians
  11. External analysts e.g. variety of measures
  12. Society and the public e.g. a variety of perceptions.
  13. Board of directors

Who needs to change or act differently in order to achieve the target outcomes?

  1. It depends upon the scope and type of transformation.
  2. People could include: cash paying customers, users, partners & suppliers, board of directors, CEO, C-Suite, employees.

What is the greatest challenge in achieving the outcomes?

  1. Those who need to change do not understand the benefits to them and thus resist or do not change.

What are your next steps?

  1. Define the words/concepts you’re using, in a glossary.  I’ve seen major confusion when the same words mean different things to different people.
  2. Define for your company the criteria for what is business transformation. Not every project is a transformation project. Use some examples.

Footnotes

1 McKinsey, “The truth about transformation”,

https://www.mckinsey.com/featured-insights/the-truth-about-transformation

2 Bain, “Business Transformation”

https://www.bain.com/consulting-services/transformation

3 Boston Consulting Group, “Business Transformation”

https://www.bcg.com/en-ca/capabilities/business-transformation/overview

4 Change Associates, “What is business transformation?”

https://changeassociates.com/what-is-business-transformation/

5 Scott Anthony, Harvard Business Review, Feb 29, 2016, “What do you really mean by business  transformation”.

https://hbr.org/2016/02/what-do-you-really-mean-by-business-transformation

Tom Koor

Is your company planning to fail? V5

Is your company planning to fail? V5

 What is the purpose of this article?

Enable Corporate Leadership (the board of directors, CEO, C-Suite, and any controlling shareholders) to discuss the degree to which your company is planning to fail.

This article does not provide tax, legal or financial advice.

You must do your own research and fact-based analysis using current and relevant information.

You can download a PDF of this article from: Is your company planning to fail V5

What are the critical learnings in this article?

  • Most companies are successfully executing their plans to fail. Most companies fail or produce poor investor returns. (Read “Your company will fail”, which is the first article under “What further reading should you do?”)
  • Plans are comprised of two parts: what is in them and what’s not in them. Plans reflect decision made and decisions not made.

The board of directors lack the knowledge and skills to make decisions.

  • A McKinsey survey of board directors showed that most had little understanding of their companies. Only 16% said directors strongly understood the dynamics of their industries; 22% said directors were aware of how their firms created value; and 34% said directors fully comprehended their companies’ strategies.1
  • A survey of board directors asked how many directors agreed that their members collective skills and backgrounds are appropriate for their organization’s needs: 54% of directors of high performing companies agreed, 40% of directors of low performing companies agreed.2

The board of directors and CEO lack the capabilities to align HR and IT with the strategy and ensure that most employees are working to achieve the strategy.3

  • 67% of HR and IT organizations are not aligned with business unit and corporate strategies.
  • 60% of organizations do not link their financial budgets to strategic priorities.
  • Incentive compensation is not tied to achieving strategy (70% of middle managers, over 90% of front-line staff).
  • 95% of employees are not aware of, or do not understand the strategy.

Corporate decisions and actions are not fact-based.

Leadership has a “seriously inaccurate perception of reality”.4

Leadership:

  • doesn’t measure the value the company is creating nr the potential value it can capture.5
  • makes the incorrect assumption that the main historical competitors will be the main future competitors.6
  • cannot learn from other companies’ failures or successes.7
  • is focused on the company mission and doesn’t hear what their customers are saying.8
  • thinks they have all the answers.9
  • fires anyone who questions plans or strategies. 10
  • relies on yesterday’s answers to solve current problems.11

 Corporate leadership has poor decision-making behaviours. 12

  • Good analysis done by good managers with good judgement produces poor strategic decisions.
  • Only 28% of executives thought good strategic decisions were frequently made.
  • 53% of business improvement is due to the quality of the decision-making process, only 8% is due to the quality and detail of the analysis.
  • One cause of poor decision-making behaviors is that leadership neither recognizes their biases nor takes steps to overcome biases in decision-making.

Corporate leadership does not understand the difference between risk and uncertainty.13

  • Risk-based decisions are determined by probability determined from analysis of historical facts.
  • With uncertainty, there are no historical facts from which to derive a probability.

The confusion between risk and uncertainty results in leadership believing they are making fact- based analytical decisions when the decisions are actually based on guesses and hopes.

Corporate leadership is not competitively differentiated in its core components of talent.

The core components of talent include:14

  • Self awareness, both internal and external
  • Character, including values, morals, and ethics.
  • Relationship skills
  • Communications, especially two-way communications
  • Crystallized intelligence
  • Fluid intelligence
  • Cognitive skills
  • Ability to quickly learn and unlearn
  • Creativity

Corporate leadership has five biases resulting in poor decision-making.15

  • Insufficient thought before action.
  • Tendency towards inertia, if uncertain.
  • Misaligned incentives, misunderstanding of strategies and objectives, and emotional attachments to personal perspectives.
  • Preference for harmony over conflict, leading to group think.
  • Recognizing patterns that do not exist.

Companies that have financial success develop behaviours leading to their decline.16

  • Success leads to entitlement and arrogance, believing success will occur no matter what happens.
  • Corporate leadership neglects focus, understanding, and renewal of the root causes of success.
  • “What” replaces “Why” (“We’re successful because we do these specific things.” Replaces “We’re successful because we understand why we do these specific things and under what conditions they would not longer work”. Corporate leadership is no longer inquisitive and learning.
  • Corporate leadership believes success is entirely due to their superior capabilities, and that luck had no role.

 Executive leadership development programs are broken. 

A survey of more than 500 global executives showed that only 11% strongly agreed their leadership development programs achieved results. What were the program flaws?17

  • Not specific to the companies’ strategic plans and drivers of business performance (e.g. turnaround, multiple M&As, organic growth, etc.).
  • Not organization-wide and not at all levels within the organization.
  • Not using digital learning embedded in day-to-day workflows. Too much use of the old teacher and classroom model.
  • Leaders did not use social media (blogs, video messages, etc.). to communicate with staff.
  • Senior leaders did not act as sponsors, mentors, and coaches.

 Companies do not recover from crisis.18

  • 20% of companies grow from insurgency to incumbency, but then two-thirds of them stall out and less than 1 in 7 stall-outs recover.
  • At any given moment, 5%-7% of companies are in free fall or about to tip into it. Only10%-15% of companies pull out of free fall.
  • 94% of large company executives site internal dysfunctions as their key barrier to continued profitable growth.

During turbulent times, the number of sinking ship companies increases 89%.19

 Founders are often the cause of start-up failures20

  • 65% of the failures of high-potential start-ups are due to people problems: relationships, roles and decision-making, and splitting the income.
  • More than 50% of founders are replaced as CEO by the third round of financing. In 73% of these founder replacements, the CEO is fired rather than voluntarily stepping down.
  • The founder’s passion, confidence and attachment to the start-up is initially a great strength. Founders often refuse to revise their strategy, misjudge the need for additional skills, and make decisions that don’t reflect the current situation.

 Leadership is the underlying cause of start-up failure.

The top nine reasons for start-up failures were identified by CB Insights. 21 I’ve shown below my point-of-view as to why leaders and leadership were the root cause.

  • 42% no market need – leaders did not validate that there were large number of potential cash paying customers who perceived they had needs and problems they were willing and pay for.
  • 29% ran out of cash – leaders did not understand cash flow management
  • 23% not the right team – leaders did not understand the talent required, how to hire, retain, and develop the right talent as the company evolved.
  • 19% get outcompeted – leaders did not understand how customers and users perceived the competition’s value propositions.
  • 18% pricing/cost issues – leaders did not understand how customers perceived their company’s value proposition.
  • 17% poor product – leaders did not understand how to oversee solution design and rollout to ensure meeting customers perceived value proposition.
  • 17% need/lack business model – leaders did not understand that a business model is needed or were unable to define one.
  • 14% poor marketing – leaders did not have marketing skill, understand their role in marketing, know the necessary cash to marketing.
  • 14% ignore customers – leaders did not believe it was important to listen to customers and take action based on what customers were saying.

The appropriate VME (Values, morals, and ethics) are not understood or agreed upon.

  • Inappropriate VME can result in:
  • Your company losing your social license to operate.
  • Your ability to attract and retain appropriate talent.
  • Reputation damage which impacts sales
  • Legal action by governments and others.
  • etc.

What are your next steps?

  • Define your terms and concepts to enable a common understanding.
  • Prepare your own set of evaluation criteria. The above reasons for failure may form some of your evaluation criteria.
  • Have your company assessment by members of your company’s ecosystem.
  • Analyze the results. Probe deeply into anything not related to talent to ensure talent is not actually the root issue.

What further reading should you do?

“Your company will fail”, Koor and Associates

https://koorandassociates.org/avoiding-business-failure/your-company-will-fail-v1/

“Traditional corporate governance dooms your company to failure. V2”, Koor and Associates

https://koorandassociates.org/2023/03/17/traditional-corporate-governance-dooms-your-company-to-failure-v2/

“Traditional strategic planning dooms companies to failure”, Koor and Associates

https://koorandassociates.org/strategy-and-strategic-planning/traditional-strategic-planning-dooms-companies-to-failure/

“Traditional risk management dooms your company to failure”, Koor and Associates

https://koorandassociates.org/corporate-governance/traditional-risk-management-dooms-your-company-to-failure/

“Traditional business transformation dooms your company to failure”, Koor and Associates

https://koorandassociates.org/business-transformation/5920-2/

“What are the three greatest risks to your company?”, Koor and Associates

https://koorandassociates.org/avoiding-business-failure/what-are-the-three-greatest-risks-to-your-company/

 

 Footnotes

1 “Corporate Boards need a facelift”, Eric Kutcher, (McKinsey Partner) McKinsey website, May 4, 2018.

2 “A time for boards to act” McKinsey Survey 2018 March

3 “Creating the Office of Strategy Management”, Harvard Business School; paper 05-701, by Robert Kaplan and David Norton

4 Sydney Finkelstein, Why smart executives fail, Penguin Publishing Group, 2004, Chapter 6

5 ibid., Chapter 6

6 ibid., Chapter 6

7 ibid., Chapter 7

8 ibid., Chapter 7

9 ibid., Chapter 9

10 ibid., Chapter 9

11ibid., Chapter 9

12 “The case for behavioral strategy”, McKinsey Quarterly, 2010 Number 2

13 Adapted from “20/20 foresight: Crafting strategy in uncertain times”, by Hugh Courtney

14 What are the core components of talent? Koor and Associates

What are the core components of talent? V4

15 “Think again: Why good leaders make bad decisions”, by Sidney Finkelstein, Jo Whitehead, and Andrew Campbell, Harvard Business Review Press, 2009

16 “How the mighty fall”, by Jim Collins

17 “What’s missing in leadership development?”, Claudio Feser, Nicolai Nielson, and Michael Rennie, McKinsey Quarterly, August 2017

https://www.mckinsey.com/featured-insights/leadership/whats-missing-in-leadership-development

18 “The founders mentality”, by Chris Zook and James Allen, 2016

19 https://www.bain.com/insights/the-new-normal-is-a-myth-the-future-wont-be-normal-at-all/

20 “The Founder’s Dilemmas”, by Noah Wasserman.

21 “Top 20 reasons start-ups fail”, CB Insights, Oct 7, 2014

Tom Koor

How profitable are search funds? V2

How profitable are search funds? V2

 What is the purpose of this article?

Help investors think about whether to invest time and money into the search fund asset class.

The audience for this article includes: investors considering search fund investments, and search fund founders.

This article does not provide tax, legal or financial advice.

You must do your own research and fact-based analysis using current and relevant information.

You can download a PDF of this article from: How profitable are search funds V2

What are the critical learnings in this article?

  • The IRR for traditional search funds in Canada and the US has been 35.2%.
  • Traditional search fund investors provide far more than capital. They also provide coaching, mentoring, board directorships.
  • You need to fund between 30 to 45 searchers, to have a high chance of approaching the IRR for the asset class as a whole.

What is a search fund?

What is a traditional search fund?1

An investment vehicle formed by one or two entrepreneurs (i.e. “searchers”) along with investor mentors.  They search for, acquire, and lead a privately held company for the medium to long-term. The searcher and investors exit at that time.  Investors fund the search costs and the acquisition costs.  The entrepreneur becomes the CEO after the acquisition.

  • These investors are very actively involved as: coaches, mentors, advisors, and board directors. The investors do far more than provide capital.
  • The searchers typically have an MBA.
  • The searchers search for a private company to acquire, lead, grow, and sell.
  • It takes 2-6 months to find the investors and capital to launch the search fund.
  • The search takes 12-24 months.
  • Growing the value of the company takes 4 to 7 (or more) years.
  • The exit process takes 6 months.

What are alternative search fund models?2

  • Self-funded search: the searcher funds the search themselves, without investors.
  • Single investor model: only one investor e.g. single professional investor, family office, private equity firm, etc.
  • Long-term hold: hold for more than 10 years.

 How profitable has the search fund asset class been

The following metrics are for the U.S. and Canada

  • 681 traditional search funds formed from 1984 through to Dec 31, 20233

The IRR has been: 4

  • 1% for all investments made, and 33.0% if the top 5 companies were excluded.
  • These IRR returns have been relatively constant from 2008 to 2023.

66% of search funds with an investment return lost some or all their investor money.

The following analysis is based on the data in “2024 Search Fund Study – Research Overview”

524 search funds have concluded

358 search funds have an investment return to investors. This excludes search funds that were still operating.

196 lost all investor money, due to no acquisition

162 exits 40 of which were negative

236 search funds (of the 358 with an investment return) lost some or all their investor money

How many search funds do you need in your portfolio?

You need a large number of search funds in your portfolio. Why?  Many funds lose money with their acquisitions or have poor returns.  You need a large number to reduce the risk of too many poor performing funds.

A Monte Carlo simulation of search fund performance suggests a portfolio size of 20 to 30 funds that have made acquisitions.6 Given that 37% of search funds don’t make an acquisition, you’d need to fund between 32 to 48 searchers, to have a high chance of approaching the IRR for the asset class as a whole.

What is the capital you require?

The following is my brief analysis of the capital you require for your search fund portfolio to approach the IRR returns of the asset class as a whole.

  • As an investor, your initial search fund investment might range from $25,000 to $50,000. Funding 32 to 48 searchers would require from $800,000 to $2,400,000.
  • Additional funds would be required to support acquisitions.
  • In the traditional search fund model, you must provide much more than capital: you need the skills and knowledge to: coach, mentor, advise, and deliver value on the boards of search funds.

If you have a small portfolio, you have a high chance of returns below the asset class as a whole.

What are your next steps?

  • Review your investment thesis, asset allocation, and investable assets to determine if you have the capital to create a portfolio of search funds.
  • Assess your skills, experience, relationships, capabilities, and time availability to determine your potential to coach, mentor, and provide value as board director.
  • Consider if you’ll create and manage a portfolio of search funds OR if you’ll invest in a fund which has a large portfolio of search funds.
  • If you’re considering investing in a fund with a portfolio of search funds, you should: Build a financial model which considers the fees and exit times of the fund; and create a due diligence process to assess the fund’s: talent, processes, business model, and historical results.
  • Regardless of the path you decide to take you must also assess the talent of the other investors. Why? The success of the traditional search fund model depends on the ability of the other investors to provide value via coaching, mentoring, and board directorships.

Footnotes

1 Sara Heston and Peter Kelly, “2024 Search Fund Study – Research Overview”, Stanford Graduate School of Business. Page 3

https://www.gsb.stanford.edu/faculty-research/case-studies/2024-search-fund-study

2 Ibid., 27

3 Ibid., 4

4 Ibid., 8

5 Ibid., 5

6 Andrew Locke, Diversification in search fund investing: The only free lunch?

https://www.linkedin.com/pulse/diversification-search-fund-investing-only-free-lunch-andrew-locke/

 What further reading should you do?

Stanford Graduate School of Business – search fund primer

https://www.gsb.stanford.edu/experience/about/centers-institutes/ces/research/search-funds/primer

Search Funds – What has made them work? Rob Johnson, IESE

https://media.iese.edu/research/pdfs/ST-0357-E.pdf

International Search Funds – 2024 – Selected Observations, IESE Business School, University of Navarra

https://www.iese.edu/media/research/pdfs/ST-0658-E

Tom Koor

Your company will fail. V3

Your company will fail. V3

 What is the purpose of this article?

This article enables a discussion about your company’s long-term survival and competitively differentiated returns to investors.

The audience for this article includes: boards of directors, CEOs, the C-Suite, individual investors, and institutional investors,

This article does not provide tax, legal or financial advice.   You must do your own research and fact-based analysis using current and relevant information.

You can download a PDF of this article from: Your company will fail. V3

What are the critical learnings in this article?

Most companies will: fail, disappear, or provide poor returns to their investors.

Most companies will not survive.

Few major companies survive:

  • 16% of major companies in 1962 survived until 1998.1
  • Of the 500 companies in the S&P 500 in 1957, only 74 remained on the list in 1997. Only 12 of those 74 outperformed the 1957-1997 S&P index.  An investor who put money into the survivors would have done worse than someone who invested only in the index.1
  • 31% of Fortune 500 companies went bankrupt or were acquired from 1995 to 2004.2
  • 52% of Fortune 500 companies went bankrupt, were acquired, or disappeared between 2000-2015.3
  • 50% of the S&P 500 will not be on the list in 10 years’ time.4

 Most public companies will not survive.

  • A Fortune 500 company will survive an average of 16 years.5
  • The typical half-life of a North American public company is 10 years.5
  • Global public companies with $250 million+ market cap have a typical half-life of 10 years.5
  • 28,853 companies traded on US public markets from 1950 to 2009. Half life was only 10.5 years.6

Global CEOs recognize that there’s a good chance their companies will not survive.

  • In 2023, 45% of global CEO thought that their company would be financially viable for 10 years or less, if it kept running on its current path.7
  • In 2024, four in ten CEOs believed their company will no longer be viable in ten years if it continues on its current path. The majority of CEOs believed they will not be in their current role in five years time. 8

Most companies will not recover from a crisis.

Companies do not recover from crisis.9

  • 20% of companies grow from insurgency to incumbency, but then two-thirds of them stall out and less than 1 in 7 stall-outs recover.
  • At any given moment, 5%-7% of companies are in free fall or about to tip into it. Only10%-15% of companies pull out of free fall.
  • 94% of large company executives site internal dysfunctions as their key barrier to continued profitable growth.

During turbulent times, the number of sinking ship companies increases 89%10

 Few major companies have sustained value creation.

Few major companies have sustained value creation:

  • McKinsey analyzed the world’s 2,393 largest corporations from 2010 to 2014. The top 20% generated 158% of the total economic profit (i.e. profit after cost of capital) created by those corporations.  This was an average economic profit of $1,426 million per year. The middle 60% generated little economic profit, an average of $47 million per year. The bottom 20% all generated negative economic profit, with an average loss of $670 million per year.11
  • Less than 13% of global companies had sustained value creation in the 1990s.12
  • 12% of public companies had sustained value creation from 2002 to 2012.13
  • Mark Leonard, CEO of Constellation Software, in his final annual CEO letter said: “Qualified and competent Directors are very rare, and not surprisingly, the track record of most boards is awful. According to the 2017 Hendrik Bessembinder study of approximately 26,000 stocks in the CRSP database, only 4% of the stocks generated all of the stock market’s return in excess of one-month T-Bills during the last 90 years. The other 96% of the stocks generated, in aggregate, the T-Bill rate over that period. This means that 4% of boards oversaw all the long-term wealth creation by markets during that period. Even more disturbing, the boards for over 50% of public companies saw their businesses generate negative returns during their entire existence as public companies.”14
  • John Rekenthaler study of the largest 5,000 US companies stock prices rom Jan 2011, to Dec 2020 showed that after 10 years, 42% ended in the black, 36% lost money, and 22% had disappeared. 15
  • In 2023, 0.4% of large companies had SVC (Sustained Value Creation) for 10 years. 10% had done it for 8 years. Half the companies had 6% or less annual shareholder return over 10 years. 16

Major changes almost always fail or create limited value.

  • Only 12% of major changes produce lasting results. 17
  • 50% diluted the value of the company.18

 Most large-scale tech programs fail

More than two-thirds of large-scale tech programs are not expected to be delivered on time, within budget, or within their defined scope. 19

Most public companies underperform the indices.

  • The 1,000 biggest publicly traded US stock from January 2011, to Dec 2020, 80% underperformed the Morningstar U.S. Stock index.20
  • In 2023, 72% of the stocks in the S&P 500 index, underperformed the index.21

Most actively managed public market funds underperform the indices.

Over a 20-year period, over 93% of large cap US funds underperformed the S&P 500 index.22

The average hedge fund underperforms the public market indices.23

  • From 2011 to 2020, the average hedge fund underperformed the S&P 500 every year.
  • In 2007 Warren Buffet made a bet with Protegé Partners that an S&P 500 index fund would outperform a group of hedge funds. Protegé Partners selected 5 fund-of-funds, which were invested in a total of 200 funds. In the 2008-2017 time period, a $1 million investment with Protegé Partners selection would have earned $220,000. The S&P 500 index earned $854,000. In 9 of the 10 years, Protegé Partners selection under performed the S&P 500 index. Warren Buffet won the bet.

Many private equity funds underperform the public market indices.

In the 10 year period ending 2024, the top quartile of private equity funds significantly outperformed the S&P 500 index. The bottom quartile significantly underperformed the S&P 500 index.  If you could have predicted which PE funds would end up in the top quartile, you would have beaten the S&P 500 index. If you could have predicted the top quartile stock in the S&P 500 index, you would have beaten the S&P 500 index. 24

Many venture capital funds underperform the public market indices.

Half of VC funds underperform the public markets.25

What are your next steps?

  • Define the words/concepts/data you’re using, in a glossary. I’ve seen major confusion when the same words mean different things to different people.
  • Your next steps will vary, depending upon the type of company you are. E.g. public, private, investment fund (e.g. Private Equity, VC fund, etc. The following suggestions should be reviewed an adapted to your situation.
  • Ask the question “Will your company be economically viable in 10 years if your company continues the current course? If yes, why? If not, why not”. Ask: your major shareholders, your board of directors, your C-Suite.
  • Review the results of your scenario planning. You must have at least three scenarios: your company fails, your company is wilding successful, the future based on currently approved plans and
  • Based on the above analysis, what changes are needed to reduce the chance of your company failing. Step one is to consider the talent on the board of directors. Step two is to consider the talent in the C-Suite. Additional steps are specific to your situation.

Footnotes

1 “Creative Destruction – why companies that are built to last, underperform the market”, by Richard Foster & Sarah Kaplan

2 “Unstoppable” by Chris Zook, 2007, page 7

3 Accenture 2016

4 “2018 Longevity Report” by Innosight Consulting

5 “Corporate Longevity”, Credit Suisse, February 7, 2017

6 “Scale” by Geoffrey West, 2017, Penquin Press, New York, Page 402

7 PWC’s 27th annual global CEO Survey

https://www.pwc.com/gx/en/ceo-survey/2024/download/27th-ceo-survey.pdf

8 PWC’s 28th annual global CEO Survey

https://www.pwc.com/gx/en/issues/c-suite-insights.html

9 “The founders mentality”, by Chris Zook and James Allen, 2016

10 Bain website article “The “New Normal” Is a Myth. The Future Won’t Be Normal at All”

https://www.bain.com/insights/the-new-normal-is-a-myth-the-future-wont-be-normal-at-all/

11 Chris Bradley, Martin Hirt, and Sven Smit, “Strategy to beat the odds”, McKinsey Quarterly February 2018, https://www.mckinsey.com/business-functions/strategy-and-corporate-finance/our-insights/strategy-to-beat-the-odds

12 “Profit from the Core” by Chris Zook. 1,800 companies in seven countries with sales in excess of $500 million analyzed.  Criteria were: 5.5% after inflation sales growth; 5.5% real earnings growth; total shareholder returns exceed cost of capital.

13 Christoph Loos, CEO Hilti Group, Swiss AmCham Luncheon, September 1, 2015.  Analysis based on about 2,000 public companies in 2002 with revenues greater than $500 million.  Sustainable value creation defined as: real revenue growth exceeding 5.5% per year, real profit growth exceeding 5.5% per year, and earning cost of capital.

14 https://www.csisoftware.com/docs/default-source/investor-relations/presidents-letter/presidents-letter-april-2018-final.pdf

15 “How many stocks beat the indices” John Rekenthaler, April 26, 2021 Morningstar

https://www.morningstar.com/markets/how-many-stocks-beat-indexes

16 “Sustained value creation – the test of the best”  Bain Jan 21, 2025. Bain’s SVC definition: net profit exceeds cost of capital and real top line growth

 https://www.bain.com/insights/sustained-value-creation-the-test-of-the-best-infographic/

17 Transformations that work, Harvard Business Review May June 2024 Michael Mankins, Patrick Litre, Bain Partners

https://hbr.org/2024/05/transformations-that-work

18 “It’s 8-to-1 against Your Change Program”, Bain website, Managing Change Blog, 2017 June 23

https://www.bain.com/insights/its-8-to-1-against-your-change-program-how-to-beat-the-odds/

19 November 13, 2024  Boston Consulting Grouphttps://www.bcg.com/publications/2024/most-large-scale-tech-programs-fail-how-to-succeed#:~:text=BCG’s%20latest%20research%20shows%20that,year%20for%20a%20single%20program.

20 How Many Stocks Beat the Indexes? Unlike the children of Lake Wobegon, most companies are below average. John Rekenthaler Apr 26, 2021

https://www.morningstar.com/markets/how-many-stocks-beat-indexes

21 Marketwatch, Dec 30, 2023

https://www.marketwatch.com/story/a-record-share-of-s-p-500-stocks-have-underperformed-the-index-in-2023-as-weirdest-bull-market-in-decades-marches-on-5d3b4cf5

22 SPIVA U.S. Mid-Year 2023 report

https://www.spglobal.com/spdji/en/spiva/article/spiva-us/

23 “The S&P 500 index out-performed hedge funds over the past 10 years. And it wasn’t’ even close”

https://www.aei.org/carpe-diem/the-sp-500-index-out-performed-hedge-funds-over-the-last-10-years-and-it-wasnt-even-close/

24 CCC Google Gemini Deep Research Analysis, March 25, 2023

25 Robert S. Harru, Tim Jenkinson, Steven N. Kaplan, and Ruediger Stucke

Has persistence persisted in private equity?

November 2020, Becker Friedman Institute for Economics at University of Chicago

https://bfi.uchicago.edu/wp-content/uploads/2020/11/BFI_WP_2020167.pdf

What further reading should you do?

“Is your company planning to fail?”, Koor and Associates

https://koorandassociates.org/avoiding-business-failure/is-your-company-planning-to-fail/

“Traditional corporate governance dooms your company to failure”, Koor and Associates

https://koorandassociates.org/corporate-governance/5786-2/

“Traditional risk management dooms your company to failure”, Koor and Associates

https://koorandassociates.org/corporate-governance/traditional-risk-management-dooms-your-company-to-failure/

“Traditional strategic planning dooms companies to failure”, Koor and Associates

https://koorandassociates.org/strategy-and-strategic-planning/traditional-strategic-planning-dooms-companies-to-failure/

“Traditional business transformation dooms your company to failure”, Koor and Associates

https://koorandassociates.org/business-transformation/5920-2/

“Scenario planning – what is it?”, Koor and Associates

https://koorandassociates.org/strategy-and-strategic-planning/scenario-planning-what-is-it/

Tom Koor

My regular update regarding my learnings and unlearnings

The purpose of this article is to share my learnings and unlearnings, with the expectation that some will be of value to you. This email was 100% written by me – not by AI.  When you send me an email, my response is 100% written by me.

My biggest learnings in the past three months:

  • The three greatest risks to your company’s success and survival are the talent of: the controlling shareholders, the board of directors, and the CEO/C-Suite. The talent pool as a whole must be competitive differentiated.
  • It is impossible to predict or forecast the future. Scenario planning helps your company prepare for the unexpected. Basing all your decisions, plans, and actions on a single, assumed to be perfect, forecast will likely result in failure.
  • Your business strategy is about making an integrated set of choices that compels desired customer and ecosystem member actions. Your business strategy, company purpose, and North Star metric are all inter-related.
  • Most companies will: fail, disappear, or provide poor returns to their investors.
  • The core reason that employees and investors will support you is because they understand “What’s in it for them”.

Sharing my learnings

My website (https://koorandassociates.org/) contains my points-of-view regarding key issues and questions regarding value creation and growth in for-profit businesses. Each point-of-view is a brief article designed to enable discussion among founders, owners, shareholders, investors, CEOs, boards of directors, and advisory boards. I do not address not-for-profits, government, or other non-profit oriented organizations.

 Below are links to my website containing: new and revised points-of-view since my last update in March.

Links to my points-of-view articles:

What is your business strategy? V2

Your business strategy is about making an integrated set of choices that compels desired customer and ecosystem member actions. Your business strategy, company purpose, and North Star metric are all inter-related.

https://koorandassociates.org/strategy-and-strategic-planning/what-is-your-business-strategy/

What are the three greatest risks to your company?

The three greatest risks to your company’s success and survival are the talent of: the controlling shareholders, the board of directors, and the CEO/C-Suite.

The talent as a whole must be competitively differentiated.  This does not mean that every single person in the talent pool must be better than all of the competition. Company success requires a team.

https://koorandassociates.org/avoiding-business-failure/what-are-the-three-greatest-risks-to-your-company/

Your company will fail. V2

Most companies will: fail, disappear, or provide poor returns to their investors.

https://koorandassociates.org/avoiding-business-failure/your-company-will-fail-v1/

Why should employees and investors support you?

The core reason for support is that people understand “what’s in it for them”. Support is emotional.

https://koorandassociates.org/creating-business-value/why-should-employees-and-investors-support-you/

Scenario planning – what is it?

It is impossible to predict or forecast the future.

Scenario planning is a process to prepare to succeed in a broad range of futures. It is not an attempt to predict a single outcome.

https://koorandassociates.org/strategy-and-strategic-planning/scenario-planning-what-is-it/

What is a business model canvas? V4

The purpose of your business model canvas is to provide an easy to understand one page framework which communicates who your customers are, why they buy from you, and how you make a profit

https://koorandassociates.org/the-startup-journey/what-is-a-business-model/

Personal Update:

  • Preparing for this summer’s startup mentoring at the University of Toronto Department of Engineering. The approach was based on weekly advisory board meetings.
  • Continued as Board Director at a private company.
  • Continued as a Patient Family Advisor at Sunnybrook Hospital.
  • Continued my long-term fundraising for the Geoff Carr Fellowship at Lupus Ontario. Over the past 18 years family, friends, neighbours, and colleagues have contributed almost $270,000. You can use the donation link later in this update
  • Continued with the Angel Capital Association in the US.
  • Continued to share with you, and on my website, some of what I’ve learned and unlearned, with the intent that some of you will find value. The learnings and unlearnings are applicable to any size company, ranging from early-stage startups to large global enterprises.

I continue to focus my time to maximize the value and impact of my two professional purposes: #1 Enabling current and emerging business leaders to succeed, #2 Enabling business leaders to have a positive impact on society.

Tom Koor

Why should employees and investors support you?

Why should employees and investors support you?

What is the purpose of this article?

This article enables a discussion about to maintain, or gain, the support of your employees and investors.

The audience for this article includes: controlling shareholders, the board of directors, and C-Suite.

This article does not provide tax, legal or financial advice.

You must do your own research and fact-based analysis using current and relevant information.

You can download a PDF of this article from: https://koorandassociates.org/wp-content/uploads/2025/03/why-should-employees-and-investors-support-you.pdf

What are the critical learnings in this article?

  1. The core reason for support is that people understand “what’s in it for them”.
  2. Support is emotional.
  3. Support has become much harder to get in today’s world.

#1 What is the core reason employees and investors will support you?

  1. They understand “what’s in it for me” and they want that. Negative reasons for support (e.g. do this or you will be fired) create limited support.
  2. Support is emotional and requires an emotional connection.
  3. Lack of support or active resistance is also emotional.

#2 What are the pre-requisites for getting support?

  1. Employees and investors must understand and trust what you’re saying.
  2. Trust must be earned.  It starts with understanding your audience by listening to them.  You need to understand, and demonstrate that you understand, their problem, needs, values & morals, and emotions.
  3. People need to perceive that you understand the world from their perspective.
  4. They need to trust the facts that you are sharing.
  5. Understanding requires that you use words and concepts which the audience understands.
  6. Often people expect that their values, morals, and ethics are the same as yours.  And that they and you have a common purpose.

#3 What destroys support or prevents support?

  1. Your audience does not understand the words and concepts you are using.
  2. They don’t believe your facts.
  3. They think you are misleading, deceiving, or lying to them.
  4. They think you neither understand nor care about them.
  5. They perceive that you are not listening to them.
  6. You are not providing value to them or helping them understand “what’s in in for them”.

#4 What are your challenges in getting support?

  1. Society does not trust its leaders and institutions. 1
  2. People don’t agree on what the facts are.  The world is swamped with misinformation and lies.  Groups of people passionately believe that they know the facts and that others are wrong.
  3. People have a broad range of values, morals, and ethics.
  4. We live in a world where massive changes happen more often.  The natural reaction to change is resistance.
  5. It can be very hard to explain to people why they should support having their livelihoods destroyed e.g. jobs disappearing due to offshoring.

What are your next steps?

  1. Define the words/concepts you’re using, in a glossary.  I’ve seen major confusion when the same words mean different things to different people.
  2. Prepare your plan, which addresses the points in #1 to #4 above.

Footnotes

1 “Society does not trust its leaders and institutions” Koor and Associates website

Society does not trust its leaders and institutions. V6

What further reading should you do?

“Managing the people aspects of supervisory change” An article I wrote for the Toronto Centre which trains financial services regulators around the worl.https://stage.torontocentre.org/media/acfupload/Managing_the_People_Aspects_of_Supervisory_Change_Updated_Links_copy_1.pdf

Tom Koor

Scenario planning – what is it?

Scenario planning – what is it?

What is the purpose of this article?

This article enables a discussion about scenario planning and why it’s critical to your company’s success and survival.

The audience for this article includes: boards of directors, CEOs, the C-Suite, and investors.

This article does not provide tax, legal or financial advice.

You must do your own research and fact-based analysis using current and relevant information.

You can download a PDF of this article from: https://koorandassociates.org/wp-content/uploads/2025/03/scenario-planning-what-is-it.pdf

What are the critical learnings in this article?

  1. It is impossible to predict or forecast the future.
  2. Scenario planning is a process to prepare to succeed in a broad range of futures. It is not an attempt to predict a single outcome.
  3. Your strategy is one component of scenario planning.
  4. Scenario planning is not enough for success and survival. Your need a competitively differentiated talent pool (board of directors, CEO, C-Suite, etc.)

Why do you need scenario planning?

  1. It is impossible to predict or forecast the future.
  2. Scenario planning helps your company prepare for the unexpected.
  3. Basing all your decisions, plans and actions on a single, assumed to be perfect, forecast will likely result in failure.
  4. An unknown future provides you with lots of opportunities as well as risks.
  5. Future success depends on your company responding quicker and better than your competition.
  6. Scenario planning helps to reduce the natural biases that all decision makers have.

In 2019, who could have predicted:

  1. A 2020 global pandemic with massive economic impacts.
  2. In early 2022 the largest land war in Europe since WW II started
  3. Nov 30, 2022 ChatGPT was announced, and the Generative AI revolution began
  4. In late 2023 large scale war began in the middle east.
  5. Jan 20, 2025 President Trump was inaugurated.  Massive changes within the US Government and around the world began immediately.

The future is a black swan. 

What is scenario planning?

  1. Scenario planning is a process to prepare to succeed in a broad range of futures. It is not an attempt to predict a single outcome.
  2. Your strategy is one component of scenario planning.
  3. Without scenario planning, you are hoping that you have guessed the right strategy for the unknown future.

The scenario planning  process has three stages

Stage 1 Prepare the initial set of scenarios

  1. This is a one-time event.
  2. There are a minimum of three scenarios: 1) the base case which represents your current strategy, strategic plan, and related plans; 2) your company fails in the future; 3) your company is a wild success in the future.

Stage 2 Monitor the external and internal factors of your scenarios on an ongoing basis

  1. Has anything happened which requires your strategy to change?
  2. Has anything happened which requires updates to your scenarios, including your base case which represents your strategy and strategic plan

Stage 3 Update your scenarios.

  1. You may need to create new ones

What is the definition of a scenario?

A scenario is a point-in-time description of your company and its environment. The description may include:

#1 External Components e.g.

  1. Key members of your company’s ecosystem E.g. competitors, suppliers, partners, politicians and regulators,
  2. Technology
  3. The economy
  4. The talent pool
  5. Demographics
  6. Social upheaval – from local to global.  This includes war.
  7. Climate change

# 2 Internal components e.g.

  1. The talent pool – board of directors, CEO, C-Suite, etc.
  2. Processes
  3. Technology
  4. Knowledge
  5. The ability or inability to quickly learn and change

#3 4 different scopes to consider

  1. What will the world look like?
  2. What will the countries you operate in look like?
  3. What will your marketplace look like?
  4. What will your company look like?

#4 A scenario has multiple points in time e.g.

  1. Today The current situation
  2. Year by year into the future.
  3. The second last year is the final year of your value creation plan.
  4. The last year is at least 10 years out.

#5 Trigger points

  1. You may identify changes in external and internal factor which will require immediate revisions to your scenario.

What is a very simple example of a scenario?

Appendix A has an illustration of a very simple scenario, created by a one sentence prompt to the free version ChatGPT.

Why will one of your target years be 10+ years?

Many organizations make decisions and take actions where the outcome can be more 10+ years. Some examples include:

  1. Some Japanese companies look out 100 years to see if they will survive and prosper
  2. Some organizations start their talent recruit in school with students as early as 10 years old. One example of why do this is because many students start to lose interest in STEM subjects between the ages of 11 and 15.
  3. Private Equity firms are often focused on maximizing value creation by the years 10-12.
  4. New planes, natural resources development, and other investments may take more than 10 years to pay off.
  5. Demographic and immigration change can take a long time to transform a country.
  6. Families with large wealth can have a multi-generational perspective.
  7. Government policy and legislation can have a long-term impact.
  8. The appointment of supreme court judges can transform a country over the long-term.
  9. Hiring permanent employees may be a long-term commitment.

Is scenario planning enough to ensure your future business success?

  1. Scenario planning is not enough.
  2. You need the right talent (board of directors, CEO, C-Suite, etc.) to be able to make decisions and execute more quickly and effectively than the competition.
  3. Your team of talent needs to be competitively differentiated.  This does not mean that every single person is the best in the world.

What further reading should you do?

  1. “Your company will fail” Most companies will fail, disappear, or provide poor investor returns.

https://koorandassociates.org/avoiding-business-failure/your-company-will-fail-v1/

What is your business strategy?

https://koorandassociates.org/strategy-and-strategic-planning/what-is-your-business-strategy/

What are your next steps?

#1 Define the words/concepts you’re using, in a glossary.  I’ve seen major confusion when the same words mean different things to different people.

#2 Outline the three stages of scenario planning.

#3 Identify who is develops the scenarios.  Consider using 3rd parties (such as MBA interns) to create success and failure scenarios.

#4 Complete Stage 1 – creation of three scenarios – in one week.

#5 Launch stages 2 and 3.

#6 Learn and improve on an ongoing basis.

Appendix A scenario created by the free version of ChatGPT

The intent of this simple scenario is to generate discussion.  The scenario is not intended to be accurate in terms of the cause-and-effect relationships. I am not recommending the use of ChatGPT vs other AI tools.

My prompt to ChatGPT

Create a scenario for a hypothetical Canadian bank called OldBank, in which the bank fails in 2030. Include: financial metrics, political changes around the world, and technology developments from China and Africa. List what happens year by year, starting with 2025

The response from ChatGPT

The Collapse of OldBank: A Year-by-Year Breakdown (2025–2030)

OldBank, a once-stable Canadian financial institution with deep roots in conservative banking, faces a dramatic collapse by 2030 due to a combination of poor financial management, political instability, and disruptive technological shifts from China and Africa.

2025: Early Signs of Strain

  • Financial Metrics:
    • OldBank reports a 3% decline in profits due to higher-than-expected loan defaults in the commercial real estate sector.
    • Rising interest rates cause mortgage delinquencies to rise by 18% year-over-year.
    • The bank’s stock price drops 12% over the year, amid investor concerns over its exposure to high-risk sectors.
  • Political & Global Economic Changes:
    • The U.S. Federal Reserve maintains high interest rates, slowing global economic growth and increasing borrowing costs worldwide.
    • Canada’s federal government tightens banking regulations in response to growing concerns over housing market instability.
  • Technological Developments (China & Africa):
    • China’s central bank launches a global digital yuan initiative, allowing international trade to bypass traditional banking systems.
    • African fintech companies introduce blockchain-based banking networks, drastically reducing reliance on Western financial institutions.

2026: Increased Competition & Technology Disruptions

  • Financial Metrics:
    • OldBank’s loan portfolio shrinks by 9%, as businesses shift to alternative lenders offering lower fees and better digital services.
    • Net income falls 15% year-over-year.
    • The bank cuts 5,000 jobs due to cost-saving measures.
  • Political & Global Economic Changes:
    • Canada’s housing market sees a major correction, with prices in major cities dropping 20%.
    • Global trade becomes increasingly fragmented, with nations forming regional financial alliances outside of Western banking influence.
  • Technological Developments:
    • China expands its AI-driven financial services, allowing direct AI-managed investments in emerging markets.
    • African digital payment platforms partner with Chinese banks, bypassing SWIFT and reducing reliance on Western financial infrastructure.

2027: Major Losses & Market Share Decline

  • Financial Metrics:
    • OldBank reports a $3 billion loss in Q2 due to bad loans in the collapsing real estate sector.
    • Stock price drops another 25%, causing panic among shareholders.
    • Deposit outflows increase as customers shift funds to decentralized finance (DeFi) platforms.
  • Political & Global Economic Changes:
    • The U.S. dollar weakens as the global financial system becomes more multipolar.
    • Canada’s government proposes a digital loonie, reducing the need for traditional banks in everyday transactions.
  • Technological Developments:
    • China’s AI-driven credit rating systems outperform Western models, leading businesses to prefer Chinese-backed financial services.
    • African economies integrate blockchain-based identification systems, allowing seamless banking access without traditional infrastructure.

2028: Regulatory Pressure & Liquidity Crisis

  • Financial Metrics:
    • OldBank’s liquidity ratio drops below 8%, triggering regulatory concerns.
    • Large corporate clients withdraw over $10 billion, fearing insolvency.
    • The Canadian government intervenes, forcing OldBank to sell $20 billion in assets to stay afloat.
  • Political & Global Economic Changes:
    • Canada enters a mild recession, increasing banking sector stress.
    • The government increases support for state-backed fintech solutions, competing directly with traditional banks.
  • Technological Developments:
    • African digital currencies become widely used in global trade, further reducing reliance on Western banks.
    • Chinese AI-driven financial advisors replace human wealth managers, offering ultra-low-cost investment solutions.

2029: The Final Collapse Begins

  • Financial Metrics:
    • OldBank fails to secure emergency funding as investor confidence collapses.
    • The bank’s market capitalization drops to $2 billion, down from $40 billion in 2025.
    • A bank run begins as depositors rush to withdraw funds, overwhelming OldBank’s liquidity reserves.
  • Political & Global Economic Changes:
    • The Canadian government signals it may not fully bail out OldBank due to the growing digital banking sector.
    • Major pension funds and institutional investors dump OldBank’s stock.
  • Technological Developments:
    • African and Chinese digital banks offer direct international accounts, siphoning off millions of OldBank’s customers.
    • AI-driven credit systems become the global standard, rendering traditional credit analysis obsolete.

2030: OldBank Declares Insolvency

  • Financial Metrics:
    • OldBank declares bankruptcy in Q2, unable to meet withdrawal demands.
    • The Canadian government splits OldBank’s assets between fintech startups and remaining competitors.
    • Shareholders and uninsured depositors lose billions.
  • Political & Global Economic Changes:
    • Canada launches a government-backed digital financial network, eliminating the need for traditional banks in many sectors.
    • The global banking landscape is now dominated by AI-driven, decentralized financial systems.
  • Technological Developments:
    • Chinese and African AI-powered financial services become the dominant players in global banking, pushing out legacy institutions.
    • Western banking collapses in several markets, marking the end of an era for traditional financial institutions.

Conclusion

OldBank’s failure in 2030 is not just a result of financial mismanagement—it is the consequence of global economic shifts, technological disruption, and changing consumer behavior. By the time it collapses, the world has moved beyond traditional banking, leaving OldBank unable to compete in an era dominated by AI, blockchain, and decentralized finance.

Tom Koor

Is a renegotiated USMCA the solution?

Is a renegotiated trade agreement between US, Mexico, and Canada the solution?

I am curious about 5 things you’re observing in your fellow leaders of other companies:

#1 Why do leaders think a renegotiated trade agreement between US, Mexico, and Canada the solution?

  1. What evidence has there been in President Trump’s history that he will honour a personal, business, or legal commitment?
  2. What evidence is there that a renegotiated agreement will be honoured or that there will be no further demands or trade issues with the US?
  3. What concessions and changes will Canada need to make to get the new USMCA and what will be the implications to individuals living in Canada?

#2 Do the leaders think this the beginning of an economic war with the US?

#3 How many boards of directors and business leaders have launched their crises management process?

  1. How many think this a crisis?
  2. How many have processes and plans which can be launched?
  3. How long will this turmoil go on  for? i.e. when, if ever, will things settle down OR will turmoil be never-ending?
  4. What changes will outlast the tenure and control of President Trump?

#4 How many boards of directors and business leaders have launched their war rooms?

  1. What is the purpose of the war room? Does it provide real time data to decision makers? Does it provide visual data and analytics both proactively and on demand? Does it provide alerts when decisions are required?  Does it update scenarios and enable fast creation of new scenario?
  2. Are the war rooms a combination of physical and virtual?
  3. What information is shown in the war room?
  4. Is the war room operational 24/7?
  5. Does it have a combination of people and AI support?

#5 What percentage of the companies your know have the right talent at the board of directors and C-Suite?

What changes in talent need to occur?

What talent development needs to occur?

How many have the right consultants and advisors in place?

 

Tom Koor

What is a business model canvas? V4

What is a Business Model Canvas? V4

 What is the purpose of this article?

This article enables a discussion about what should be in your BMC (Business Model Canvas). The BMC is the story of who your customers are, why they buy from you, and how you make a profit.

The audience for this article includes:

  • Early-stage company founder, leaders, and investors.
  • Established company and business unit leaders.
  • Boards of directors, C-Suite, and investors.

This article does not provide tax, legal or financial advice.

You must do your own research and fact-based analysis using current and relevant information.

You can download a PDF of this article from: What is a business model canvas V4

What are the critical learnings in this article?

  • The purpose of your BMC is to provide and easy to understand one page framework which communicates who your customers are, why they buy from you, and how you make a profit. The one-page framework is supported by additional detailed information.
  • If your company has a single BMC, then everything to create and run your company is within the scope of your BMC. The bulk of the information will be within your supporting documentation.

A-What is the purpose of your BMC?

  • The purpose of your BMC is to provide and easy to understand one-page framework which communicates who your customers are, why they buy from you, and how you make a profit. The one-page framework is supported by additional detailed information.

B-What is the value of your BMC?

  • It focuses on who your target customers are and their perception of your value proposition.
  • It directly ties your internal value creation to your customers perception of their value creation.
  • It enables competitive advantage by identifying your unique value proposition.
  • It provides a common language for leaders, employees, and others.
  • It should be easy to create, update, and enable scenario planning.
  • It enables fast and easy brainstorming.
  • The initial version may be based on assumptions, which can then be validated or rejected.

It is a tool which helps leaders learn

C-What does your BMC look like?

  • Your BMC is a one-page slide, with bullets, outlining the 9 components: customer segments, customer value proposition, customer relationships, channels, key partners, key resources, key activities, cost structure, revenue streams.
  • Your BMC has a multi-page supporting document with further facts, analysis, and assumptions regarding each of the 9 components. This supporting document will have links to other documents in your company.
  • Your company may have multiple BMCs. E.g. if you have different types of customers with different problems and needs which require different solutions.

D-What does the one page slide look like?

I’ve attached a link to one example of a Business Model Canvas from Steve Blank’s Stanford University 5-day program for startups The startup was called “Cratiso This BMC was created in 5 days, sometimes changing in the course of a single day. It illustrates the value of quickly talking to lots of potential customers.

https://koorandassociates.org/wp-content/uploads/2025/02/business-model-canvas-cratiso.pdf

E What are the 9 components of your BMC?

How do you read this section?

  • There is a definition of each of the nine components.
  • Then there are a series of questions you need to answer for each component.

#1 Customer Segments

Definition

These are the target customers and users.  Each customer and user segment will have its own value proposition.

Questions to answer include:

  • Who exactly will you be creating value for?
  • Who are the cash paying customers? Who are the users? g. Google has users who pay no cash to do searches.  Google has advertisers who pay cash.  Without users, Google. would have no customers.
  • What are their problems and needs?
  • What are the geographic, social, and demographic characteristics of your customer segments?
  • How many customers are willing and able to pay to address their problems and needs?

#2 Customer Value Proposition

Definition

A value proposition is the customers perception of value.

This perception can be influenced by: facts, emotions, family & friends, social media, etc.

The value proposition = (All the customer achieved benefits) / (All the customer incurred costs)

All the customer achieved benefits can include both financial and non-financial (e.g. time savings, convenience, status, etc.)

All the customer incurred costs can include financial (purchase costs, costs to switch to your company, other adoption costs, and ongoing costs) and non-financial (time, inconvenience, loss of status, etc.)

The value proposition also needs to be competitively differentiated.

Questions to answer include:

  • What value does each customer segment expect to receive from your solution?
  • What’s the customer need or problem that they will open up their wallet for?
  • Do people agree that you are solving a high value problem or need?
  • What does the customer believe will be the impact of your solution? E.g. 10 times improvement in something?

#3 Customer Relationships

Definition

What type of customer relationship do your customers expect to have with you?

Questions to answer include:

  • How will you get, keep, and grow customers?
  • Why type of relationship does each customer segment expect you to establish and maintain?
  • What types of relationships have you already established?
  • What is the cost of each type of customer relationship?

#4 Channels

Definition

Channels are how to connect the value proposition to the target customer.  There are three different types of channels:

  • Communications – used to communicate with potential customers. There may be many communications channels.
  • Sales – where customers and sellers agree on the transaction. Usually there are fewer sales channels than communications channels.
  • Logistics – how to deliver the solution to the customers.

Questions to answer include:

  • How does the value proposition get to the customers and users?
  • How will you be selling and distributing?
  • Through what types of channels do the customers want to be reached? In other words, what channels are most effective? E.g. website, app, social media, face-to-face, marketplaces, etc.
  • What channels already exist?
  • Which channels are most cost efficient?
  • Which channels are integrated with customer processes?

#5 Key Partners

Definition

A partner may also be a channel, if the answer is “yes” to one of the following questions:

  • Who are the key partners and suppliers?
  • What exactly are you acquiring from them?
  • What are they going to do and when?
  • Is the partner a leading entity with a brand and market position that adds to your credibility?
  • Does the partner add expertise and resources to your product solution in a way that increases the value of the product for the end customer?
  • Is the partner (and their brand/expertise/resources) required to land contract with the key target customers?

Questions to answer include:

  • Who are the key partners?
  • Who are the key suppliers?
  • What key activities, supporting your value propositions, do your partners perform?
  • How effective are your current partners and suppliers?
  • What types of partners and suppliers do you need?

#6 Key Resources

Definition

Key resources mean any relevant intellectual property (IP), technical expertise, human resources, financial and physical assets, key contracts and relationships. In other words, resources refer to anything within your control that can be leveraged to create and market your value proposition (e.g., a patent pertaining to your value proposition, key contacts within the industry).

Questions to answer include:

  • What resources are necessary to:
    1. Enable the customer to achieve their value proposition?
    2. Maintain channels and partnerships?
    3. Build relationships with customers?
    4. Build revenue?
  • What resources exist today?
  • How effective are they?

#7 Key Activities

Definition

The key processes that are required to weave together your resources with those offered by your partners to deliver the value proposition, manage channels and relationships, and generate revenue. Examples of key activities include R&D, production, marketing, sales and customer service.

Questions to answer include:

  • What are the most important things you need to do to make the business model work? What key activities are necessary to:
    1. Enable the customer to achieve their value proposition?
    2. Maintain channels and partnerships?
    3. Build relationships with customers?
    4. Build revenue?
  • What activities exist today?
  • How effective are the current activities?

#8 Cost structure

Definition

The cost of delivering the value proposition, including the resources needed and key activities involved. We want to answer the following key question

Questions to answer include:

  • What are the most important costs in the business model?
  • What are the largest costs?
  • What are the fixed costs and variable costs?

The financial cost details will be in the monthly cash flow forecast, summarized into a one-page cash flow forecast.

#9 Revenue Streams

Definition

How will you charge your customers and what will you charge?

Questions to answer include:

  • What is the specific value the customers are willing to pay for?
  • What is the revenue strategy for each customer segment e.g. How will the customer be paying – usage, subscription, one-time, freemium, etc.
  • How much are they paying today?
  • What is the pricing model? How will you set the price for each customer segment and revenue strategy?
  • How are they paying today? i.e. the customers current revenue strategies and pricing.

The revenue cost details will be in the monthly cash flow forecast, summarized into a one-page cash flow forecast.

F- Are all the parts of your company in your BMC?

What if you are a company with a single BMC?

  • Every company component is in your BMC. E.g. Board of Directors mandate, company policies.

What if you have multiple BMCs? E.g. you are a multi-division established company.

  • Your BMC is no longer self contained e.g. There may an overall board of directors. Your BMC will reside within your company’s business framework. I will be publishing a revised version of that framework by the end of February, 2025.  At that time, I will include the link here.

G-What are your next steps?

  • Take the free video course “How to build a startup”

https://www.udacity.com/course/how-to-build-a-startup–ep245

Take detailed notes. There is little value in passively watching without taking notes.

  • Start to build your BMC and supporting document.

 What further reading should you do?

The following is just one of many PowerPoint and word BMC templates on the web.

https://neoschronos.com/download/business-model-canvas/ppt/

Appendix How do you communicate the evolution of the BMC?

  • All assumptions in italics. On day one of launching the startup, it’s likely that all of the entries will be assumptions.
  • When assumptions are invalidated, due to input from customers, users, and other fact-based analysis, the assumption is crossed out, with a footnote referencing the document which contains the rationale for invalidation.
  • When an assumption is validated, there is a footnote referencing the document which contains the rationale for validation.
  • You won’t be able to show all of the invalidated assumptions. New assumptions will be made.  Only the most important validations will remain on the BMC. Less important validations will be dropped from the one-page BMC and may be included in the supporting documentation. You may decide to keep an appendix which contains all the of the invalidations and validations.