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WHITEPAPER
SF ROX
Investing in Execution Pays Dividends
Updated July 2011
Erik Berggren
V P of Customer Results & Global Research
Bjorn Eriksson
D irector of Customer ResultsSUCCESSFACTORS / WHITEPAPERSUCCESSFACTORS INVESTING IN EXECUTION PAYS DIVIDENDS
Execution in Good Times
and in Bad Times
SuccessFactors' agenda is no secret, nor is it humble: increase worldwide productivity by 50%. It is audacious and not easy to measure consistently. However, the following pages will present one measure of our success and explain the linkages between our work and tangible customer results.
In the fall of 2008, when impending doom and financial crisis were on every headline, closing the gap between strategy and execution rapidly made it to the top of CEO agendas. Other items that increased in importance were speed, flexibility, adaptability to change and people performance.
At this time we decided to invest in our customers. We believed that the execution and people performance advantages we offer would help them outperform their competition. Especially in those tough times, since execution and adaptability to change matter even more when conditions are deteriorating rapidly.
We were right: our customers significantly outperformed the market, and far fewer of them have yet to regain their value. To understand why, we applied the learning from more than one thousand business cases built together with our customers. That work has given us tremendous insight on how we drive value in different industries, geographies, and organization sizes. We can be very precise in how and why we create tremendous value for our customers.
This paper will discuss the selection and performance of the SuccessFactors portfolio, and more importantly the detailed links between investing in execution and financial results.
SuccessFactors' customers were almost three times more likely to capitalize strongly on the downturn.
2SUCCESSFACTORS / WHITEPAPERSUCCESSFACTORS INVESTING IN EXECUTION PAYS DIVIDENDS
Companies Above the Execution ThresholdWhen selecting which customers to invest in, we picked customers with a critical mass of software modules.Specifically, we included all public customers where more than half of the employees used at least three modules for at least three full quarters. As can be seen in Graph 1, these companies represent a wide variety of industries. They are split almost equally among NYSE and NASDAQ. The full list can be found in Appendix A.
We call this portfolio the SF ROX - SF Research Return on Execution portfolio.
9.8% Business Service4.9% Consumer Service9.8% 4.9% EnergyFinancial Service
9.8% Hardware9.8% HealthcareHigh Tech4.9% Industrial Manufacturing9.8% Industrial MaterialsInsurance9.8% Research & Development4.9% Retail
7.3% 7.3% Software2.4% 4.9% Utilities
Graph 1 - SF ROX Industry Composition
3SUCCESSFACTORS / WHITEPAPERSUCCESSFACTORS INVESTING IN EXECUTION PAYS DIVIDENDS
Capitalizing in the DownturnSince October 2008, our investment in our customers - companies focused on execution - have significantly outperformed all major indices, includes fewer companies that lost value, and more that gained significant value. SF ROX Gap vs. major indices, 10/1/2008 - 7/1/2011180 Perf. since 10/1/08160 SF ROX +60%
0 14001 NASDAQ +36%=800 1202/1 S&P500 +15%/01 x 100ed 10/1/2008 1/1/2009 4/1/2009 77//11//22000099 1100//11//22000099 11//11//22001100 44//11//22001100 77//11//22001100 1100//11//1100 1/1/2011 4/1/2011 7/1/2011nI 80
60
40 Graph 2 - SF ROX Portfolio vs S&P 500, Dow Jones and Nasdaq, 10/1/2008 to 7/1/2011
Graph 2 clearly shows how SF ROX companies started outperforming all three major indices as soon as economic conditions stabilized in March 2009. Since then, the gap has steadily increased. S&P500 increased 15% between 10/1/2008 and 7/1/2011, while SF ROX increased 60%. Comparing to the NASDAQ index, SF ROX delivered 1.7x the value: 65% vs. 36% (20% and 12% annualized).
SuccessFactors' customers were less likely to have destroyed value since the downturn.
4SUCCESSFACTORS / WHITEPAPERSUCCESSFACTORS INVESTING IN EXECUTION PAYS DIVIDENDS
Why Are These Companies Outperforming the Market?We have seen a strong correlation between investing in SuccessFactors' Business E... [download for more]
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