txho/11022ho0402color.pptACCELERATINGINNOVATIONINENERGYEnergyisKey...NowOctober22,2002Thisreportissolelyfortheuseofclientpersonnel.Nopartofitmaybecirculated,quoted,orreproducedfordistributionoutsidetheclientorganizationwithoutpriorwrittenapprovalfromMcKinsey&Company.ThismaterialwasusedbyMcKinsey&Companyduringanoralpresentation;itisnotacompleterecordofthediscussion.txho/11022ho0402color.ppt2TODAY’SDISCUSSION•Capitalmarkets:ruthlessdriverofinnovation•CreativedestructionintheEnergyIndustry•WhatcanHoustondotoleadinnovationinEnergy?txho/11022ho0402color.ppt3LONG-TERMSURVIVALISDIFFICULT,ANDGETTINGMORESONote:NumberofexitsaveragedovertwentyyearperiodSource:McKinseyanalysis19351955197519952005E•TheS&P500isabrutal,unemotionalyardstickofperformance•ThepaceofchangeisacceleratingImpliedlifetimeinS&P500basedoncompanyexitsinyearstxho/11022ho0402color.ppt4MARKETSWININTHELONGTERMOverallperformanceofS&P500wouldhavebeen…ifitweremadeupofthosecompaniesonthelistin1957about20%lessperyear…txho/11022ho0402color.ppt5HISTORICALPERFORMANCEHASBEENANALYZEDUSINGTHEMcKINSEYLONG-TERMPERFORMANCEDATABASE(PDB)PDBoverviewEnergysectorsFinancialdata(60items)for1,067companiesin16industriesfortheperiod1962-2000*IndustryNumberofcompaniesAirlines23CommodityChemicals36SpecialtyChemicals47Defense28MedicalSupplies66Software171Paper47Pharmaceuticals101Soap24Transportation25Semiconductors55Utilities104Oil170Telecommunications55Industries•Interestingdynamicstoanalyze•Morethan10playerswith50%ofsalesintherelevantSICcategoryCompanies•U.S.-based•BelongedtoapredeterminedSICcode•Obtainedatleast50%oftheirsalesfromspecifiedSICcode(“pure-play”)•Hadamarketcapwithinthetop80%ofallmarketcapvalues•CompaniesthatIPOedinlast4yearsmetbothmarketcapandpureplaycriteriaforthelast2years•Companieswereremovedonlywhentheymerged,gotacquiredorwentbankruptSelectioncriteriaTotalEnergysubtotal2741,067Computerhardware73Network42*Currently2000datahasbeenupdatedonlyforhightechcompaniesSource:McKinsey’slong-termperformancedata...
