Illinois Tool Works Looks Set Up for a Solid 2024

We view Illinois Tool Works as a well-run collection of moaty businesses. The company focuses on niche markets, with most of its activities centered on resolving its most valuable customers’ pain points. ITW’s products and services are designed to reduce customers’ costs, either through ease of use, which lowers training costs, ensuring compliance with environmental and safety standards through quality products, or eliminating steps or parts in a manufacturing process. ITW is famous for using an 80/20 process (an application of the Pareto principle) that focuses on the most lucrative profit opportunities that it calls the 80. Every project comes from a customer problem that ITW solves through what it calls Customer-Back Innovation. In 2023, ITW said that CBI contributes about 200 basis points to annual organic growth.