B2B Transformation in the Electronics Industry

30
Sustaining Competitiveness Through Business Model Transformation Paul Brody Global Industry Leader, Electronics

description

How are the same trends that affect the consumer electronics industry going to affect companies operating in the B2B space? This presentation from IBM's electronics global leadership forum takes you through case examples and recommendations.

Transcript of B2B Transformation in the Electronics Industry

Page 1: B2B Transformation in the Electronics Industry

�!

Sustaining Competitiveness Through Business Model Transformation Paul Brody Global Industry Leader, Electronics

Page 2: B2B Transformation in the Electronics Industry

© 2012 IBM Corporation �

Consumers Lead Transformation, Enterprises Lag�

Eroding Obstacles to B2B Transformation�

Preparing for the Future�

Page 3: B2B Transformation in the Electronics Industry

© 2012 IBM Corporation �

Enterprises used to know how to do disruption.�

Ad copy © Wang Laboratories.

Page 4: B2B Transformation in the Electronics Industry

© 2012 IBM Corporation �

Once upon a time, IBM disrupted Apple.�

Page 5: B2B Transformation in the Electronics Industry

© 2012 IBM Corporation �

Lately, it’s consumers that have led the way, adopting mobile, social and cloud services at an enormous pace.�

CONTENT�

APPLICATIONS�

CONNECTIVITY�

SERVICE�

Seamlessly integrated across multiple devices�

Page 6: B2B Transformation in the Electronics Industry

© 2012 IBM Corporation �

The global leadership positions in the electronics industry changed dramatically in just 10 years (1 of 2)�

Long before people waited in line for iPads, they waited in line for the new PlayStation 2�Sources: Yahoo Finance, Bloomberg, and Thomson Reuters company financials and reports !

Enterprise Market Value – November 2001!(Market Capitalization, in Billions of U.S. dollars)!

Page 7: B2B Transformation in the Electronics Industry

© 2012 IBM Corporation

We believe the same dramatic transformation is coming to B2B electronics markets�Sources: Yahoo Finance, Bloomberg, and Thomson Reuters company financials and reports !

The global leadership positions in the electronics industry changed dramatically in just 10 years (2 of 2)�

Enterprise Market Value – November 2011!(Market Capitalization, in Billions of U.S. dollars)!

Page 8: B2B Transformation in the Electronics Industry

© 2012 IBM Corporation

Salesforce.com and Workday are great success stories, but the market clearly doesn't believe Oracle and SAP are in danger�

0!

20!

40!

60!

80!

100!

120!

140!

160!

NetSuite! WorkDay! SFDC! SAP! Oracle!

Enterprise Market Value – October 2012!(Market Capitalization, in Billions of U.S. dollars)!

Page 9: B2B Transformation in the Electronics Industry

© 2012 IBM Corporation �

In many ways, the B2B market bears out this sluggish rate of change. Case%Example:%Large%Energy%and%Industrial%Automa8on%Company�

Only half of the devices that can be

connected are….�

…none of the data streamed is used

proactively…�

…and technology is still sold as a product,

not a solution.�

Percentage of the installed based that can be connected to the Internet and the proportion that actually is being connected�

Percentage of installed base in which analytics are applied to usage and performance data to predict maintenance or other requirements�

Revenue from bundled solutions versus discrete product, service sales�

80%!

15%!

5%!

Products!Services!Solutions!

Source: Data based on interviews with client executives. Numbers under 5 percent mean “unknown and thought to be very small” rather than 0.�

Page 10: B2B Transformation in the Electronics Industry

© 2012 IBM Corporation ��

Consumers Lead Transformation, Enterprises Lag�

Eroding Obstacles to B2B Transformation�

Preparing for the Future�

Page 11: B2B Transformation in the Electronics Industry

© 2012 IBM Corporation ��

There are three critical barriers to the same rapid transformation in the enterprise�

Relationship based sales Large, installed product base Complex purchasing process & capital expense

Page 12: B2B Transformation in the Electronics Industry

© 2012 IBM Corporation ��

Relationships are between people, not enterprises.�

And these days, the person is in charge.�

Page 13: B2B Transformation in the Electronics Industry

© 2012 IBM Corporation ��

Diminished B2B

relationships�

Spend analytics�

Online marketplaces�

Procurement systems�

• Spend analytics provides new insights into how to reduce costs!

• Online marketplaces are standardizing terms and making pricing transparent!

• Procurement systems make rogue spending difficult!

• B2B relationship selling is more difficult now!

• Business cases that depend on capturing benefits are easier to execute!

• Pricing and performance differences across solutions are more easily compared!

Analytics and online marketplaces are making procurement relationships ever more transparent�

Page 14: B2B Transformation in the Electronics Industry

© 2012 IBM Corporation ��

By 2025, China is likely to be the biggest market in the world for several key industries!Emerging markets buyers are focused on new growth, mature market buyers are more focused on maintenance of existing systems�

Manufacturing�

Utilities�

Chemicals�

Petroleum�

Electronics�

Incremental replacement of the installed base no longer drives demand and valuation�

Page 15: B2B Transformation in the Electronics Industry

© 2012 IBM Corporation

Economics of low volume production are changing���

Page 16: B2B Transformation in the Electronics Industry

© 2012 IBM Corporation ��

The shift from products to services is radically simplifying the buying decision and creating compelling ROI�

Source: Photizo Group, MPS Advisory Service, MarketWatch™!

Page 17: B2B Transformation in the Electronics Industry

© 2012 IBM Corporation �

What happens when you combine these trends?�Enterprise Transformation at Consumer Speeds.

'Containers falling off the Rena', URL: http://www.nzhistory.net.nz/media/photo/containers-falling-rena, (Ministry for Culture and Heritage), updated 30-Aug-2012

Page 18: B2B Transformation in the Electronics Industry

© 2012 IBM Corporation �

•  Virtuous Cycle: Inflection point to rapid change: at 15 percent of the market, a sudden takeoff in the proportion of spending is shifting to managed print services

•  Huge Value Proposition: Compelling 30+ percent cost reductions for customers, higher margins for winning vendors

•  Service Extension: Branching beyond copying into printers, processes, and other IT infrastructure services

•  Winner Takes All: Transformation driving consolidation toward larger vendors

Case Example: the entire market for printing services transformed itself in 3 years between 2008 and 2011�

Source: Photizo Group, MPS Advisory Service, MarketWatch™!

Huge Growth for Managed Print Services, Represented by the Number of MPS Programs Announced!75%!

50%!

25%!

0%!

= Number of new MPS programs!

= MPS program growth!

1! 1! 1! 1!

10!

31!

11!2!

1%! 2%! 3%! 4%!

14%!

45%!

56%!58%!

2004! 2005! 2006! 2007! 2008! 2009! 2010! 2011!

Page 19: B2B Transformation in the Electronics Industry

© 2012 IBM Corporation ��

The transition looks very similar to the that overtook the mobile phone industry in it’s own transition to smart devices In the consumer space, winners dominate profits. Will it be the same in the enterprise?�

Profit shares of eight mobile phone companies�100%!

0%!

25%!

50%!

75%!

Q2/2007! Q4/2007! Q2/2008! Q4/2008! Q2/2009! Q4/2009! Q2/2010! Q4/2010! Q2/2011! Q4/2011!

Nokia!Sam!

RIM!

SE!

LG!

Apple!

HTC!

© Asymco!

Page 20: B2B Transformation in the Electronics Industry

© 2012 IBM Corporation ��

Across B2B segments that have been transformed, the winner-take-all model appears to be quite powerful�

99%�

74%�

52%�

Infrastructure share of top three mobile systems vendors in 2010: Huawei, Ericsson and NSN�

Share of mobile device industry profits going to Apple and Samsung in 2011�

Proportion of the managed print services business contracts taken by Xerox, HP, and Ricoh, the top three in 2010�

96%�Web-site hosting share of the top three cloud infrastructure providers in 2011: Amazon, Rackspace, and Linode�

Source: Asymco, Gartner, MobileNews, DailyWireless, Jack of All Clouds, and IBM Research!Source: Photizo Group, 2011 MarketMetrics™!

While not always as stark as in B2C, the winner-take-all nature of products-to-services transformations leaves the market transformed in relatively short order!

Page 21: B2B Transformation in the Electronics Industry

© 2012 IBM Corporation ��

A shake-out in printing has been taking place for more than a decade

Page 22: B2B Transformation in the Electronics Industry

© 2012 IBM Corporation ��

Amidst all that destruction, a whole new ecosystem has risen up to service the printing and imaging industry:�

Source: Photizo Group, MPS Advisory Service, MarketWatch™!

2006 2009 2012

Ecosystem Growth and Technology Adoption, 2006, 2009, and 2012!Professional services!Resellers!Infrastructure providers!OEMs!Software!

Number & Type of Enterprises Serving the Printing Ecosystem Market

Page 23: B2B Transformation in the Electronics Industry

© 2012 IBM Corporation ��

Consumers Lead Transformation, Enterprises Lag�

Eroding Obstacles to B2B Transformation�

Preparing for the Future�

Page 24: B2B Transformation in the Electronics Industry

© 2012 IBM Corporation ��

Key Conclusions: Electronics markets that are undergoing B2B transformation exhibit three key characteristics�

Transformation is business-case driven�

Once started, transformation is swift�

Connected-device markets are “winner-take-all”�

•  20-40 percent annual savings and elimination of CapEx have had biggest impact!

•  Analytics, platforms, and new services come after transformation!

•  Change can happen in between 0.5 and 1.0 product life cycles!

•  Three years in managed print services!•  Five years in network equipment!

•  Transformed markets show rapid consolidation of industry players!

•  Profitability consolidation even stronger than market share!

2!3!

Page 25: B2B Transformation in the Electronics Industry

© 2012 IBM Corporation ��

Disruptive competitors have a history of re-framing the product and objective, using technology to think outside-in�

Free.fr!•  Competition thought it was selling

cable TV!•  Free is building a national fixed

and mobile network!

Square!•  Competition thought it was selling

transactions processing!•  Square is selling customer

intimacy and analytics!

Amazon Cloud!•  Competition thought of Amazon

as a retailer that was out of its depth!

•  Amazon sees itself as a technology company!

Data Center image, Flickr Creative Commons!

Page 26: B2B Transformation in the Electronics Industry

© 2012 IBM Corporation ��

For companies in B2B, the single strongest protection from disruption is customer intimacy. How well do you know them?�

The same piece of equipment…�

…can be viewed from multiple value propositions:�

A commodity that’s costly to own and operate.�

A key differentiator in the overall solution�

A failure-prone “weak link” that causes down time�

One part of a larger set of business issues�

…with different transformation options:�

Reduce cost of ownership, eliminate capital expense�

Guarantee capacity, build deep design partnership�

Sell uptime and results instead of the device�

Expand to other markets to sell total solution�

CNC image, Flickr Creative Commons!

Page 27: B2B Transformation in the Electronics Industry

© 2012 IBM Corporation �

When market transformation accelerates, organizations should drive transformation outside in, starting with client-facing work�

Sales�

Service�

SCM�

R&D�

Finance�

In B2B, leaders have often started with the client-focused value proposition and then aligned their organizations to support it� •  Started with the cost-per-page value

proposition!•  Still completing the transformation to

a solutions and services organization�

•  Created the Integrated Systems Solution Company in 1991, the predecessor to Global Services!

•  ISSC became the world’s second- largest IT services firm in it’s first four years of operations!

•  Alignment and integration of Global Services followed!

Page 28: B2B Transformation in the Electronics Industry

© 2012 IBM Corporation �

We cannot predict the future… we can only prepare for it.�

Product-to-service transformation has been slower in B2B electronics than in consumer�

The traditional impediments to this transformation are now eroding quickly�

When transition does happen, it’s driven by a compelling business case, not just technology�

Products-to-services transitions, when they happen, are swift and “winner-take-all”�

Page 29: B2B Transformation in the Electronics Industry

© 2012 IBM Corporation ��

Before the PC, before disruptions and the Internet and everything, the IBM brand stood for one thing above all else�

Page 30: B2B Transformation in the Electronics Industry

��!

Email� •  [email protected]

Linked!In� •  Profile!:!hJp://www.linkedin.com/in/pbrody!

Reading!List� •  On!Delicious!:!hJp://www.delicious.com/prbrody!•  On!TwiJer:!#WorthReading�

TwiJer!&!ADN� •  @pbrody!

Sina!Weibo� •  @pbrody!