Paul.Gromball@tmg-muenchen.de1Aug 2016

Creating the learning Enterprise

The TMG Approach

Digital Implementation Platform to create, build and launch Smart Services

Industrial

Smart Service

DIP

DIPDigital Implementation Platform

2

For Companies who want to become a Smart Services Leader, TMG provides a Digital Implementation Platform which enables dynamic B2B value creation through layering the platform operating model on top of the existing linear product value chain

DIP

3

Smart ProductsIndustrie 4.0

Smart ServicesDisruption

Customer

Initiatives

Revenue Impact

Profit Impact

Smart Product Initiatives Smart Service Initiatives

86 % 14 %

62 % 38 %

39 % 61 %

The Profit and growth consequences of Smart Services

The Emergence of the Smart Service Market

DIP focuses on the fast growing global Smart Service Market

Source:Kim, Chan et al: Blue Ocean Strategy, Harvard Business School, 2015Base: 150 global companies in 30 industries

• Smart Service Lead Market• Smart Service Lead Provider

• Many Start-ups• Internet incumbents

Smart Service Leadership

The linear Business Model

Observation I: The German Approach to Smart ServiceThe Product World Mindset

4

Value Chain Operation

Value Chain Design

Production Engineering

Integrated Supply

Product Strategy

Product Design

Research

IT

HR

Shared Services

FI

Inbound-Logistic

Production(Digital Twin)

Outbound-Logistic

SupplierSmart

Service

Product support-based Smart Services are not very profitable at present: Customer expect high up-time for

“Made-in-Germany” Products

Representative Smart Service Solution

Communication andAnalytics Hardware

Temperature Sensors

Source: ABB

• Product Connection• Remote Services • Condition Monitoring• Predictive Maintenance• Pay per Use

The Product World Mindset leads to a lack of preparedness for digital Disruption

Key Driver:• Efficiency• Automation

SalesChannels

Marketing

5

Observation II: The US Approach to Smart ServiceThe Digital World Mindset

The Platform Business Model

The Value Eco-System

Compensates

Creates Connects

Consumes

VALUE-UNIT:Smart Services

Producer Team

2

Customer Team

Supply Demand

Art of the Possible (Non)Customer Pain

Platform

Sales

Physical World Mindset

DigitalWorld Mindset

Physical Key

DigitalKey

Representative Smart Service Solution

Key App

• Customer Experience• Customer Connection

Think different

The Digital World Mindset focuses on Customer Connection & Experience which reshapes Industries

Key Driver:• Network Effects• Fast Learning

Source: International Monetary Fund

North America Europe Africa, Latin America, ROWAsia

2015 Nominal GDP US$ Total: 73.1 TTHE GLOBAL ECONOMY IS RELATIVELY BALANCED

v10.7 T23.5 T19.5 T 19.5 T

North America Europe Africa & Latin America

Asia

North America has the most $1B+ platform firms, as measured by market cap. China, with a large homogeneous market, is growing fast. Europe, with a more fragmented market, has less than ¼ the value of North America

PrivatePublic

THE PLATFORM ECONOMY IS UNBALANCED

The Platform ChallengeThe emerging Platform Economy based on Smart Services is unbalanced

DIP addresses the Key Performance Gaps of German Firms Germany as an international player has key engineering strengths –

Pressure to move to digital Improvements continues to grow

7

Relative German Strength vs. USA & Chinahighlow

Futu

re B

usi

ne

ss I

mp

ort

ance high

low

International Digital Benchmark Result

Key Strengths• Engineering

Capability• Importance of

Production• Sustainability

No focus field No focus field

Source: Industrie 4.0 Internationaler Benchmark: acatech, Heinz Nixdorf Institut; Thomas Sattelberger

?

Growing Pressure• Business Models• Digital Capabilities• Entrepreneurship

German Firms have to improve in three key action fields in order to escape the Sandwich Position:• Business Models• Digital Capabilities• Entrepreneurship

Implication

Germany is in a Sandwich Position

DIP enables an integrative Approach to improve the Digital Performance with Smart Services

DIP Phases in the evolution of smart services

8

ImplementationPhases

A) Business Strategy

PHASE IB) Business Model

PHASE IIC) Digital Capabilities

PHASE IIID) Entrepreneurship

DIP Workshop I• Segmentation• Scenarios• Evaluation

DIP Workshop II• Initiative Scope• Talent Pool• Network• Blueprint

DIP Workshop III• Platform

Prototyping• Plan Activation

Sessions

Design the Hybrid Business Model

Shaping superior Value-Ecosystems

Fostering Empowered Execution

• Aligning Strategy with Business System

• Smart Service Scenario

• Design Work-Graph

• Focus on Key Goals

• Apply Digital Leadership Framework

• Architecture of Participation

• Set-up Digital Design Platform

• Design Digital Network

• Governance System of Community

• Activating Competence Network

• Joint Consciousness

• Achieving goal by driving Lead measures

External Smart Service 1 2 3

Internal Smart Service 1 2 3

9

GoogleUBERAirBnB

The Value EcosystemThe Value Chain

The „Red Ocean“ Business The „Blue Ocean“ BusinessThe Linear Business Model The Platform Business Model

KukaPutzmeisterEEW

Intense Competition:• Monoculture and Hierarchy• Focus on internal Efficiency/costs• Supply Economies of scale• Zero-Sum Game

Avoiding Competition:• User creates value for user• Focus on Disruption• Demand Economies of Scale• High Risk/High Rewards

The Digital Business Areas

Basis: Dr. Bleise,

The Value EcosystemThe Value Chain

The „Green Field“ Business

The Hybrid Business Model

German EngineeringAutomotivePharmaceuticals

AppleNike

Cooperation:• Linked Value Creation Processes• Focus on Effectiveness/Integration• Adaptability & Innovation• Win-Win : Collective Intelligence

A. The Business Strategy DIP leverages existing strengths to create the Hybrid Business Model

The Key Strength

The Machine House The Digital House

Future

Today

DIP

Smart Products Smart Service

10

B. The Business ModelDIP is layering Smart Services on top of the product value chain

The Value Ecosystem

Smart Service

Sales

More Demand

More innovativePlatform Content

MoreInnovative

Applications

Lower problem solving time

The Value Chain

Smart Products

Mutually reinforcing value creation of Smart Products and Smart ServicesGerman Engineering Example

Customer Dynamics

Lower Costs, higher Speed

More interested Customer Engineers

Efficiency• Resource control• Internal optimization• Focus on customer value

Adaptability• Resource orchestration • External interaction• Focus on ecosystem value

Value Creation by Material & Energy

Value Creation byInformation &

Knowledge

C. The Digital Capability DIP builds the Dual Organization for creating Smart Products and

Smart Services in concert

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The Operating Model of the dual Organization

Basis: Haufe Quadrant

Go

vern

ance

Sys

tem

Self

-Org

aniz

ed

Doer: Duplication

Creator: Innovation

Knowledge Work

Mar

ket

Dyn

amic

s

1

2

Co

ntr

olle

d

Smart ServicesLeadership-driven network

Role of the employee

Smart ProductsManagement-

driven hierarchy

Diversity ofDigital Capability

Rules

Competences

12

D. The EntrepreneurshipDIP is a distributed Leadership Tool for scaling agile Networks

Digital Implementation Platform Architecture

PERIPHERY

Competence Teams

MARKET• Customers• Stakeholder

Customer Teams

Supply DemandVALUE-UNIT:

Smart Services

CENTER

Digital Implementation PlatformDesign, build and launch Smart Services

Level 3:InfrastructureDistributed Leadership Tool

Level 2:ParticipantsCompetences

Level 1:OrganizationRules & Principles

Principles1. Focus on the Key Goal2. Act on Lead Measures3. Keep a compelling Scoreboard4. Create a Rhythm of Social

Accountability

Key GoalRole 1 Role 2

Enabling Self-Organization• Transparency• Cooperation• Feedback• Learning• Coordination

Competence Building• Coaching• On the job Training

Endproduct

13

Digitally Engage Customers

Value Creation: Periphery Value Creation: CustomerValue Creation: Center

Enabling the Periphery Teams

Phase I: Connect Employees Phase II: Connect Customers

B2B Smart Service Platform

Enabling the Center Team

2

Customer TeamCompany TeamCompany Team

VALUE-UNIT:Smart Services

VALUE-UNIT:Smart Services

The DIP Outcome: Collective-Intelligence@Scale

The B2B Smart Services Platform

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The Collective-Intelligence@Scale AdvantageFreeing Resources for value-creating Activities and Growth

Res

ou

rces

(co

sts,

em

ail t

ime.

.)

Cooperation

Linear Business Model

Platform Business Model

The Effect on Business Performance

Digital Transformation

Time-Reduction

30 -50%

SpeedFast Responses

Reduction of

non-value added expenses

25 -30%

Efficiency Work Productivity

Additional Value-Creation

by Cooperation between Teams

30 -35%

GrowthCollective Creativity

Limits of Growth: Knowledge Resources

Growth Effect

Source: Morieux, Yves: Six Simple Rules

15

TMG has a long history of creating, building and launching successful B2B Platforms

The TMG B2B Platform Journey

Supply

Demand

VALUE-UNIT

PharmacyPlatform

AirfreightPlatform

Euro-Logistics Platform

E-Sourcing Platform

Smart Service Platform

Online Ordering

WholesalerPharma-Company

Pharmacists

AirfreightTrack & Trace

Airlines

Freight ForwarderShipper

Multi-ModalTrack & Trace

CarrierLogistics Services

ReceiverShipper

RFQ/Offer

Seller

Buyer

Smart Service

Producer• Center• Periphery

1984 1989 1994 2000 2007

Customer

Richness

Reach

Low

Germany

Low

Global

Low

Europe

Medium

Global

High

Global

Trigger IBM Dominance IntegratorsMobil Phone Competition

New Economy Digital Disruption USA

German EngineeringAutomotivePharmaceuticals

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Automotive Engineering

Other Industries

Technology Management Group Profile

Competences- Internet Driven Strategic Changes- Business Development- Accelerating Innovation Process- Mobilizing People in Networks

FactsOffice: München founded 1987

TMG helps companies create, build and launch new digital initiatives from within their organization