From global connection
to global orchestration
Future business models for high performance
where technology and the multi-...
Foreword ................................................................... 1
Executive summary....................
Foreword                Ten years ago, the world entered a
                        period in which globalization would
Executive summary

After the storm: two                     of emerging-market companies in the         By reducing bar...
Six new market-making                       • New businesses that use IT              • Technology is unleashing consumer-...
• Individuals are collaborating           Optimization: Achieving operational        Second, they develop deep and
This report is based on two major         The 420 survey participants are all        The respondents’ companie...
The multi-polar world
Accenture uses the term “multi-polar     world—new consumers, talent,            Talent
world” to de...
Resource sustainability                     The canvas of the multi-polar world        and consistently different ways. In...
After the storm:
Two defining trends of the next era

When the dust created by the              The shift to a multi-po...
Figure 1: Trends in emerging markets and new information technologies are the most-
cited developments impacting businesse...
Figure 2: New developments and capabilities in IT                                                   Remote sensors—These c...
likely as those in developed markets      Figure 3: Growth in Internet connectivity
to buy and use consumer IT—such       ...
The new market-making forces

The business ecosystem is now              Figure 6: A perspective of ecosystem disruptio...
Here is a review of the six new market-                   Some new companies take this idea
making forces:                ...
New bridges between                       Other examples include Apple’s iPhone      These developments present
keep their networks up to date with         Peer-to-peer markets                      Cooperative consumption
the latest t...
of location-based technologies,            Figure 8: Businesses see management of complex networks as the most significant...
Mastering orchestration

New information technologies and            Figure 10: Few businesses are advanced in their re...
Figure 11: IT is seen as critical in helping business orchestrate global operations                          previously, i...
which streams live traffic updates         revenues from Safaricom’s data-              They continuously seek greater
to ...
Accenture From Global Connection To Global Orchestration
Accenture From Global Connection To Global Orchestration
Accenture From Global Connection To Global Orchestration
Accenture From Global Connection To Global Orchestration
Accenture From Global Connection To Global Orchestration
Accenture From Global Connection To Global Orchestration
Accenture From Global Connection To Global Orchestration
Accenture From Global Connection To Global Orchestration
Accenture From Global Connection To Global Orchestration
Accenture From Global Connection To Global Orchestration
Accenture From Global Connection To Global Orchestration
Accenture From Global Connection To Global Orchestration
Accenture From Global Connection To Global Orchestration
Accenture From Global Connection To Global Orchestration
Accenture From Global Connection To Global Orchestration
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Accenture From Global Connection To Global Orchestration

  1. 1. From global connection to global orchestration Future business models for high performance where technology and the multi-polar world meet
  2. 2. Contents Foreword ................................................................... 1 Executive summary................................................ 2 Methodology............................................................ 5 The multi-polar world ........................................... 6 After the storm: Two defining trends of the next era ................. 8 The new market-making forces ......................... 12 Mastering orchestration ....................................... 17 Implications for government .............................. 22 Last word .................................................................. 24 Case studies ............................................................. 25 Sources ...................................................................... 30
  3. 3. Foreword Ten years ago, the world entered a period in which globalization would come of age. It was to be an evolution the new market-making forces at work. For companies and markets, the implications of these forces, even in both substance and form. The in embryonic form, are profound. rise of emerging markets planted new economic flags, diffusing and Organizations have a great rebalancing economic power across opportunity to harness these forces ever more countries and regions. to their advantage to optimize, extend At the same time, globalization or even transform their business morphed from being a chiefly one- models. Locating and orchestrating way phenomenon—with exports and the right global connections outside labor flowing from East to West— the organization become, perhaps into an indisputably multidirectional paradoxically, the key to achieving an and interdependent contest for ever closer focus on the competitive consumers, resources, capital, talent essence of the business. Excellence and innovation. The economic map in networks, relationships and data- became truly multi-polar, the world driven insight will be required. Some larger in geographic scope yet smaller of the necessary responses may seem in economic distance. counterintuitive. Throwing open Mark Foster the doors of the company will not The past two years, though, will be come naturally. Broadening the field Group Chief Executive remembered less for trends than for of dialogue takes time and effort; events. The attention of business customer insight requires work. Yet Global Markets and and political leaders everywhere was these investments will help define Management Consulting rightly absorbed by combating the competitive advantage for the future. worst effects of the financial crisis and economic downturn. Now, as Accenture’s multi-polar world research the dust thrown up by the global program was launched in 2006 to downturn begins to settle, business help companies and public-sector leaders and policymakers are starting organizations striving to achieve to focus once more on the longer- high performance respond to the term influences shaping tomorrow’s changes in the world’s economies. economy. The advent of a new decade Our aspiration for this report, the is a natural time to take stock of fourth in the series, is that it will the interplay of the forces in global spur organizations to move beyond economics and their implications for straightforward connectedness toward business and government. an effective global orchestration of powerful new economic possibilities Two trends that feature prominently that increasingly lie beyond the in my conversations with business traditional frontiers of the enterprise and government leaders are and fully harness the potential of the acceleration of multi-polar pervasive new technology waves. globalization and the transformative potential of newly mature information technologies—including cloud, mobile and collaborative computing. These two trends have not only continued apace during the downturn, but have drawn added strength and speed from it, spurred by the intensifying quest for Mark Foster efficiency, competitiveness and new Group Chief Executive customers across the world. Global Markets and Less well known is how IT and the Management Consulting multi-polar world are also enabling individuals and enterprises to connect and communicate in order to create value in new and different ways. Our research has sought to look beyond the daily headlines about social networking, blogging and crowd- sourcing to reveal and understand 1
  4. 4. Executive summary After the storm: two of emerging-market companies in the By reducing barriers—such as access Fortune Global 500—a leading ranking to markets, upfront investment, defining trends for the of the world’s largest companies—has and economies of scale—IT and the next era risen from 20 in 1995 to 91 in 2009. multi-polar world are intensifying competition. New entrants from As the world emerges from a period At the same time, a number of emerging markets, free of legacy of economic torpor, attention is information technologies are maturing. systems and processes, can access refocusing on two long-term trends The levels of access, cost, standards, pay-per-use business infrastructure. whose continued rise has been openness, reliability and ease of use Niche players anywhere in the world obscured by the recent turmoil: of both hardware and communication can build competitive cost bases the changing shape of globalization capabilities have developed to the and cut new paths to market. New and the maturing of information point at which software can be readily consumers, better connected and technology (IT). used to combine them to newly better informed than ever, are entering powerful effect in business and social the global marketplace. The rise of a multi-polar world settings. The coming together of cloud economy—in which economic power services, collaborative computing, and activity are increasingly diffused mobile communications and other across geographic borders—continues technologies creates new options for apace. The recovery now under businesses in all regions. In particular, way is demonstrating the resilience in responding to and reinforcing of emerging markets. Developing growth in emerging markets, IT adds economies already account for more weight to the shift toward economic than half of world output. They multi-polarity. have not only weathered the crisis better than developed economies, but they are also helping to power the global recovery, generating the bulk of expected growth in the global economy in 2010. The confident rise of emerging economies is mirrored in the corporate arena. Indeed, the number 2
  5. 5. Six new market-making • New businesses that use IT • Technology is unleashing consumer- to build new bridges between to-consumer content as like-minded forces producers and customers are individuals share information and Yet it is not simply a story of emerging. From rural banking to opinion about products and services— competition becoming more intense: collaborative apps platforms, these often in an open and global forum competition itself is changing. The intermediary players are harnessing where the objective is not profit, intertwining of IT and the multi-polar new technology to make markets but an increase in the knowledge or world has made a number of new in places where geographic or economic welfare of participants. economic relationships possible for the economic distance had previously Shifting market power away from first time. This sets the stage for doing held supply and demand apart. producers toward consumers, this business in completely new ways—not force has implications for reputation, • Changes in the capability, reach by simply connecting across the multi- quality, the meaning of brand and, and cost of IT are enabling new forms polar world but by orchestrating the where content can be digitized, for the of business-to-business commerce. six new market-making forces that survival of entire industries. Thanks to cloud computing and the Accenture's research identified: myriad business models it and other • IT is allowing consumers to • Co-production between companies technologies make possible, even participate in peer-to-peer markets and their customers or suppliers is for niche providers, companies have for the cooperative production of blurring traditional boundaries within greater access—fast, across borders, goods and services in tandem with industry value chains. Innovation and and often at variable cost—to efficient other consumers. Often driven by a product design are two areas in which and industrialized functions to support desire to unlock new efficiency or enterprises are using new technologies a more focused core. effectiveness in a product or service, to tap into the collaborative input peer-to-peer players can quickly of a growing number of stakeholders open up new market space while also around the world. reducing the power of alternative providers. For example, international peer-to-peer microfinance platforms are challenging assumptions about lending to small entrepreneurs in high- growth economies. 3
  6. 6. • Individuals are collaborating Optimization: Achieving operational Second, they develop deep and electronically to engage in cooperative excellence in current business wide networks with consumers, consumption. Social computing can activities. New information entrepreneurs and other businesses. make it easy for consumers to signal and collaboration tools can By opening themselves up to the their group buying intentions—and also enhance the quality of products ecosystem, high-performance to increase that collective bargaining and services, improve customer businesses will draw strength beyond power by advertising the offer and service and reduce costs. the sum of their parts. By connecting enlarging the cluster of committed to consumers through social Extension: Developing current customers. This “team buying” alters computing and advanced analytics, business in new areas. Companies the dynamics of discounting and of they will undertake an open dialogue can harness new technologies product tailoring. that directs product and service to extend existing business enhancement while building loyalty. By These new market-making forces, models into additional, or opening up to external entrepreneurs and the full range of IT developments completely new, industries. and businesses, they can co-opt the they draw on, have big implications. Transformation: Growing new experience and capabilities of others Businesses will have to operate in a business in new areas. Companies can to develop new, innovative solutions much more complex ecosystem, where deploy IT to build new business models at low cost. And by divesting some customers, suppliers, competitors for entry into previously unreachable— in-house functions to external service and other producers are increasingly or even unimagined—markets. providers, such as cloud owners and interconnected and interdependent. horizontal service providers, they can The new forces heighten a number The instruments of increase efficiency and reduce costs. of business challenges, including the management of networks of orchestration third parties, competition from new Orchestrating market-making forces market entrants, and the protection of is a complex undertaking. It requires proprietary information and data. They an understanding of how these forces also present significant opportunities are spawning new business models. that were not previously available, For the majority of businesses, the including working more efficiently, question will be: where to start? collaborating in new ways with Our research has identified two business partners, and reaching new hallmarks of success that will be markets or customer groups. increasingly important to underpinning a company’s competitive performance. In the government sphere, too, the Understanding these practices offers a market-making forces offer an guide to businesses seeking to emulate opportunity to improve public-service and excel against the competition. value and policy effectiveness, as well as the prospect of innovative solutions First, they actively seek greater to social challenges—ranging from insight. Tomorrow’s high-performance energy usage to security—within and businesses will exhibit unusually high across national borders. levels of business intelligence, putting in place infrastructure with which they Mastering orchestration can constantly amass and analyze data to glean valuable insight. Their Strikingly, only 11 percent of business leaders will regularly communicate leaders we surveyed believe that the importance of round-the-clock their companies are significantly alertness, displaying advanced advanced in their strategic response levels of awareness themselves to the disruptive business environment and gearing their organizations’ brought about by the intersection talent-development programs of the multi-polar world and accordingly. In an age when open- developments in IT. For businesses source information services have looking to harness the changed made everyone an "expert," there is ecosystem to their advantage, the enormous potential for competitive imperative is to move beyond global advantage by employing advanced connectedness toward a more tools for capturing data and analyzing proactive, continuously managed it to produce rich, timely, actionable global orchestration of the new insights. A passion for data-driven market-making forces that are now continuous improvement will become available. A number of businesses, a fundamental tenet of a high- both traditional and new, are already performance organization’s culture. doing so to unlock core business improvement in three areas: 4
  7. 7. Methodology This report is based on two major The 420 survey participants are all The respondents’ companies represent strands of research. First, we analyzed senior business leaders. Close to one- a wide range of annual revenues, the interaction between information third (32 percent) are chief executives, from less than US$50 million technologies and globalization, drawing presidents or managing directors; (32 percent of respondents) to on a range of secondary data sources, 30 percent are other C-level more than US$10 billion (18 percent our extensive experience working executives; and 30 percent are senior of respondents). More than half of with clients in each of these areas vice presidents, vice presidents the respondents (54 percent) work and the groundbreaking work of the or directors. Respondents are for companies that have been in Accenture Technology Labs. Second, distributed across 30 industry business for more than 20 years. we commissioned the Economist sectors, including financial services, Intelligence Unit (EIU) to conduct a electronics, high technology, survey to identify how companies consumer goods, professional are evaluating and responding services, chemicals, energy, utilities, to developments in information telecommunications, automotive, technology and globalization. retail, and media & entertainment. The fieldwork for the EIU survey was Thirty-one percent of respondents are conducted in October and November from companies primarily based in the 2009. The survey asked respondents Asia-Pacific region: 30 percent are which global developments and IT- from North America; and 26 percent related trends would have the greatest are from Western Europe. Other impact on the business environment, respondents come from the Middle which IT-related opportunities and East, Africa, Latin America and Eastern threats their companies faced and Europe. Approximately one-third of what strategies they were planning companies have physical operations to implement in response to those in more than 20 countries, while 18 opportunities and threats. percent have physical operations only in their home markets. 5
  8. 8. The multi-polar world Accenture uses the term “multi-polar world—new consumers, talent, Talent world” to describe the diffusion innovation, resource sustainability, While many Western economies of global economic power across and capital—that multinational are grappling with the effects of a widening range of regions and businesses can harness for short-term contracting workforces and shortages countries, with that diffusion flexibility and long-term growth. of specialized skills, emerging- accelerated by information technology, These dimensions, which span market workforces are set to expand greater economic openness, and emerging and developed economies, dramatically. In the decade to 2020, the growing size and reach of constitute the arena in which the working-age population of multinational companies. companies now need to compete. emerging economies is expected to increase by more than 500 million, While many of the new poles of New consumers compared with an increase of only economic activity are in the “Big 6” Many emerging markets continue 3.7 million in developed economies.1 emerging economies—Brazil, China, to enjoy impressive growth in India, Mexico, Russia and South consumer spending, bolstered by Innovation Korea—increasingly they include long-term fundamentals such as Innovation is no longer the exclusive next-wave locations such as Egypt, population growth, rising incomes province of developed markets. Nigeria and Turkey. Together with the and an emerging middle class of A combination of investment, more-established centers of economic consumers who aspire to developed- education and a strategic policy activity, these rapidly emerging world standards of living. IT offers focus on new technologies has economies are radically reshaping businesses new ways to reach and spurred the development of new the economic geography in which serve these emerging customers clusters of innovation in emerging businesses must operate. and to craft innovative business economies. Witness the rise of models that uncover otherwise nanotechnologies and biotech in Accenture first explored the latent pools of demand. Beijing, digital media and genomics characteristics and drivers of in Seoul, biofuels in Brazil and this new phase of globalization automotive technologies in Poland. in its 2007 study, The Rise of the Multi-Polar World. In that study Accenture identified five increasingly competitive and interdependent dimensions to the multi-polar 6
  9. 9. Resource sustainability The canvas of the multi-polar world and consistently different ways. In Because of global commodity also features a large and increasingly particular, the findings showed that markets and optimized supply chains, diverse cast of public and private companies need to: companies feel the effects of volatility players operating alongside and Create geographic options— in prices or supply movements more competing with traditional, developed- proactively and continually look quickly than ever. At the same time, market multinationals. Chief among outward to sense their environment they face the prospect of a world with these are the emerging-market and make focused choices about where dwindling fossil-fuel resources—and multinationals, which have become to compete and whom to engage. increasing obligations to preserve increasingly prominent as they natural resources. The challenge is expand their international activities. Be authentically local—embed to find the right balance of supply These companies were the subject of themselves with full commitment in security, price stability, efficiency Accenture’s second multi-polar world their chosen markets, weaving their gains and environmental sustainability. study, in 2008, titled The Rise of the operations into the fabric of local Emerging-Market Multinational. business and society. Capital In the third multi-polar world study, Network the organization—create Pools of capital are increasingly visible in 2009, titled Strategies for achieving organizations that are permeable, both in the emerging world—not only in high performance in a multi-polar internally and externally, enabling nascent capital markets but also world: Global choices for global flows of ideas, people and industry via new players such as emerging- challenges, Accenture studied how leading practices to the right places at market multinationals and sovereign high-performance businesses had the right time. wealth funds. With approximately US$3.9 trillion in assets under been evolving their strategies in management in 2008, sovereign response to the multi-polar world. wealth funds—state-backed entities The research found that high- that invest surplus foreign reserves performance businesses conceive of overseas—dwarf private equity and and execute their strategies in new could reach US$8 trillion by 2015, according to some estimates.2 7
  10. 10. After the storm: Two defining trends of the next era When the dust created by the The shift to a multi-polar • Emerging markets are expected to recession has settled, it may not be generate the bulk of the growth in the an exaggeration to view multi-polar world is accelerating world economy in 2010;4 globalization and new information For some time now, businesses have • Emerging markets attract a larger technology developments as the two found themselves operating in a share of foreign direct investment defining trends of the era ahead. world where economic power and than developed markets, and drive Powerful individually, each augments possibility are increasingly diffused an increasing share of outward and enhances the other. Their interplay across geographic borders, especially investment flows;5 and is setting the stage for substantial to emerging markets—a process that changes in how businesses see and Accenture terms the rise of the multi- • The six largest emerging economies interact with the world around polar world (see “The multi-polar (the “B6”)—Brazil, China, India, Mexico, them—in how they orchestrate their world”). In the depths of the downturn, Russia and South Korea—are on a path interactions with other entities rather it was easy to wonder whether this to grow by 5.1 percent in 2010.6 than simply connecting with them. shift to emerging markets had stalled. Levels of risk aversion rose sharply and This rebalancing of economic activity Among business leaders worldwide, investors and businesses withdrew features not only the B6; it is evident there is a palpable sense that capital, often to shore up core also in the next wave of emerging significant change is afoot. Forty-one businesses at home. But the nascent economies, among them Indonesia, percent of executives believe new recovery is now demonstrating the Malaysia, Nigeria, Thailand and Turkey. players from emerging markets to be resilience of emerging markets. Much of this growth results from one of the two developments that Developing economies have not only emerging-market businesses that have will have the most impact on business weathered the crisis better than continued their onward march amid over the next five years, according to developed economies, but they are also global recession. Indeed, the number Accenture’s survey; 35 percent pointed helping to power the global recovery: of emerging-market companies in the to new technology capabilities Fortune Global 500—a leading ranking (see Figure 1). • In 2009, for the first time, emerging of the world’s largest companies—has markets accounted for half of the more than quadrupled in less than global economy;3 15 years, from 20 in 1995 to 91 in 2009.7 8
  11. 11. Figure 1: Trends in emerging markets and new information technologies are the most- cited developments impacting businesses over the next five years In your view, which two of the following developments will have the most significant impact on your business over the next five years? (Select two) Growth in size and reach of new players from 41% emerging markets Increase in the capabilities of new information 35% technologies Slower economic growth in developed markets 27% Emergence of a changed corporate finance 24% landscape Greater involvement of government in 23% markets/business Greater access to customers globally 20% Greater access to inputs (resources, talent, ideas) 12% from international markets Climate change and the policy/regulatory 12% responses to it Rising security threats 5% Emerging-market companies have While the multi-polar world increases Software has been the essential tended to fare well during the the scale of the business landscape catalyst in this revolution. It has recession, partly owing to strong local and introduces new competitors, brought together hardware and growth but also to highly competitive developments in IT are creating new connective infrastructure to apply cost structures and a long history of connections and new possibilities technologies to real-world problems, serving customers at low (or multiple) for businesses to achieve high needs and wants—both in business price points. For example, Indian performance around the globe. and social spheres. Businesses conglomerate Godrej has created are now increasingly using a wide a new type of refrigerator priced The continuing IT revolution variety of newer technologies between US$65 and US$75; using to meet their objectives. These solid-state technology instead of a While the attention of policymakers range from pure hardware such compressor, the unit is lightweight and business leaders has been focused as cloud-based servers or remote and can cool 30 liters of food.8 on the biggest economic upheaval of sensors, and communications Similarly, China’s Zhongxing Medical the past 50 years, the rapid march of technologies such as mobile and has transformed the domestic information technologies has gone broadband, to complex software- radiography market in the past largely unnoticed. During this time, driven technologies such as social decade by creating a technology that information technologies have reached computing and advanced analytics. renders X-ray images in digital form, new levels of maturation in terms of bypassing the traditional lengthy access, cost, openness, standards, Yet IT can be only as relevant as the and expensive chemical process. By reliability and usability. This is true content it holds, transmits or serves 2009, the company had a 50 percent both of IT hardware—including servers, up. This period of IT maturation share of the Chinese market—despite PCs, smartphones and sensors—and coincides with increasing levels 40 percent price cuts by developed- of communication technologies, with of digitization—the availability of market competitors.9 mobile and broadband connectivity content in electronic form. Not only nearly ubiquitous in the developed are books, music and news all online, world and increasingly common across but increasingly so are taxes, medical much of the developing world. records and bank deposits. And in the future, remote sensors will allow a raft of physical objects to interact with people—and each other. 9
  12. 12. Figure 2: New developments and capabilities in IT Remote sensors—These create new ways to track goods across the supply chain and to obtain information about product usage. Predicting They are an important element in information the development of “smart grids” that integrate households and power grids in ways that increase energy efficiency and reduce energy use. Analytics Advanced analytics—This is the Moving Analyzing information information extensive use of data, statistical Collaborative analysis, explanatory and predictive computing models, and fact-based management Mobile tools to drive decisions and actions.10 Businesses can harvest Cloud computing greater insight and competitive advantage from the mass of data Sensors accumulated in the course of IT developments producing and selling to customers or operating plants and equipment. Sensing Processing information IT capabilities information These developments in IT are not only changing the options available to businesses, but are also accelerating the move toward a multi-polar world. IT-powered multi-polarity IT continues to make the world feel smaller to organizations. As the availability, affordability and The business impact of a client process clouds. The emergence power of IT continue to increase, selection of current technologies of cloud providers serving many geographic distance becomes less different companies will promote relevant for today’s multinationals. So what will the transformation in the greater standardization and Bangalore can be as convenient power of information technologies industrialization of business processes, as Boston, Seoul as accessible as mean for business? Earlier phases yielding significant scale efficiencies Seattle. Cost-effective and powerful of the IT revolution enabled us to and allowing the optimization of IT IT makes it possible to closely monitor move and process information, functions across the entire cloud. a manufacturing plant in Vietnam or powered by computer processing to track components across a global cycles, dependable and sophisticated Collaborative (social) computing— supply chain. The Internet instantly software, and networking capabilities. This encompasses a wide variety of links suppliers directly to billions of Recent developments are enabling IT technology tools that allow real-time potential customers across the world. to sense, analyze and even predict networking and collaboration among The growing global middle class, information, creating new capabilities users, both at home and increasingly more and more reachable through in the generation and application of in the workplace. It facilitates the the Internet and mobile phones, business insight (see Figure 2). creation of online communities of offers businesses the prospect of interest that companies can tap into reaching millions of new consumers Cloud computing—This provides to source ideas, test products and with greater discretionary spending businesses with access to computing services, and market new offerings. power (see Figures 3, 4 and 5). power, software and process Mobile technology, in particular, has management functions from a remote Advances in mobile technologies— been crucial in increasing access third-party provider, enabling them These technologies are now coming to markets, particularly among the to pay “per use” and avoid the need into their own, not just for personal world’s poorest. Mobile phones, for to own significant infrastructure communication, but also for remote example, allow farmers to access themselves. Types of cloud services telemetry. Mobile technologies allow live market prices for their produce, include IT infrastructure (access to businesses to reach customers at any and they bring banking services to hardware and servers), platforms time wherever they are, tailor services remote areas for the first time. A (development environments for to the customer’s exact location and recent Accenture survey of consumers applications), applications (accessed sell to previously unreachable markets. revealed that those in emerging through Web browsers) and multi- markets are more than twice as 10
  13. 13. likely as those in developed markets Figure 3: Growth in Internet connectivity to buy and use consumer IT—such Percentage of the population using the Internet as Web-enabled mobile phones, 80 smartphones and netbooks—in 2010.11 Advances in IT also allow 70 companies to access the increasingly 60 sophisticated workforces of the 50 emerging world, meaning that ever- more-complex tasks can be carried 40 out across virtual global networks. 30 The new capabilities of IT have 20 the potential to benefit the 10 competitiveness of emerging-market multinationals. Using IT, they can 0 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 leapfrog to create cheaper, more Developed economies Emerging economies flexible business processes without the concerns of legacy IT that confront Source: International Telecommunications Union, 2009; Accenture analysis their developed-market counterparts. It is no wonder that, between 2010 and 2013, IT spending is forecast to Figure 4: Growth in use of mobile telephones grow 5.8 percent per year in emerging Total number of mobile cellular subscriptions in the world (in billions) markets compared with 3.6 percent in 4.5 developed markets.12 4.0 IT and the multi-polar world 3.5 have enlarged the business 3.0 ecosystem 2.5 77% 2.0 74% Taken together, the rise of the multi- 71% polar world and the maturation of IT 1.5 67% are changing the nature of competition 62% 1.0 57% 53% and the nature of stakeholder 41% 47% 0.5 36% 33% 29% 26% 23% interactions. The ecosystem in which 59% 53% 47% 43% 38% 64% businesses have traditionally operated 0 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 has enlarged and become more Developed economies Emerging economies complex: more competition, more stakeholders, more customers, spread Source: International Telecommunications Union, 2009 across more geographic boundaries. As the following chapter explains, the two trends are also combining to Figure 5: Growth of the middle class generate new ways of creating value Number of households (in millions) with annual incomes greater than US$5,000 among stakeholders—with important (at constant prices and at purchasing power parity) consequences for businesses. 800 700 600 500 400 300 200 100 0 1999 2004 2009 2014f Developed economies Emerging economies Source: EIU 11
  14. 14. The new market-making forces The business ecosystem is now Figure 6: A perspective of ecosystem disruption populated by more stakeholders and competitors, complicating the terrain 6a. Traditional view of the business ecosystem for companies around the world. However, a further reality is dawning: the nature of competition itself is B2B B2C End-consumers changing. Accenture has identified companies companies how the intertwining of IT maturation and the rise of the multi-polar world are generating six forces that are creating new market potential 6b. New market-making forces are creating a more complex business ecosystem (see Figure 6). These forces are leading to novel configurations of capital, talent and resources that open up 1 1 4 B2B B2C more efficient forms of production; companies companies End-consumers unlock new products and services; introduce new business models; and 3 6 5 open more components of the value 2 2 2 chain to collaborative execution. Intermediaries Co-production between firms and Consumer-to-consumer content sharing 1 their customers and suppliers 4 Using IT to create new bridges Peer-to-peer markets operating outside 2 between producers and customers 5 the traditional value chain New forms of B2B commerce, Cooperative consumption by groups of 3 including the emergence of specialist 6 end-consumers “horizontal” players 12
  15. 15. Here is a review of the six new market- Some new companies take this idea making forces: to its logical extreme and have built their business models entirely Co-production on harnessing the experience of external individuals. Marketocracy, an More and more companies are investment-management and research harnessing their customers’ ideas, firm, manages mutual funds based tastes and productive powers. Danish on the top performers from more toy maker Lego has launched an online than 100,000 model portfolios run by customization platform—its Design amateur investors.17 byME site—where enthusiasts assemble components for their own designs, There are strong indications that which Lego then makes available to business leaders are starting to take other customers.13 Dell launched its customer co-production seriously. IdeaStorm site to tap into the ideas of Half of the business leaders responding the global community of Dell users; to to Accenture’s survey think that date, the company has implemented greater collaboration with customers hundreds of the 12,000-plus ideas (for example, crowdsourcing of design suggested at the site.14 Companies can or innovation) will have a significant or also use such communities as tools very significant impact on competition to reach out into the marketplace. in their industries over the next five Lancashire Tea generated publicity, years (see Figure 7). as well as useful input, when it asked its fans on Facebook to help choose its new packaging designs.15 Estée Lauder invites bloggers to its perfume launches to help generate online buzz around new fragrances.16 Figure 7: Impact on competition of long-term IT-related trends What impact will each of the following long-term IT-related trends have on competition in your industry over the next five years? Emergence of new, faster or more flexible business 15% 47% 25% 11% 2% processes Greater consumer connectivity (e.g. via mobile, 20% 39% 25% 11% 4% broadband) Greater returns from applying insights about 12% 46% 27% 12% 2% customer behavior/preferences Growth in the bargaining power of more knowledgeable 16% 41% 29% 10% 3% consumers Greater collaboration with customers 13% 37% 29% 17% 3% (e.g. crowdsourcing design or innovation) Increased ease, or lower cost, of expansion into new 9% 35% 34% 19% 3% markets or regions Emergence of new business models (e.g. "freemium" 13% 30% 27% 22% 6% online news, open-source software) Increased ease, or lower cost, of market entry for new 11% 30% 30% 23% 5% players Declining time advantage of being first to market 9% 24% 39% 21% 6% 0 10 20 30 40 50 60 70 80 90 100 Very significant Significant Moderate Limited None Don’t know 13
  16. 16. New bridges between Other examples include Apple’s iPhone These developments present apps, which provide a new revenue particular opportunities for small producers and customers stream for Apple and a creative and companies, which can now take Information technologies are being entrepreneurial outlet for others, advantage of the benefits of scale used to enlarge markets. Two and Amazon’s “Marketplace,” which previously enjoyed only by large examples: selling mobile phone offers small businesses the chance to businesses. Larger businesses are banking services in rural areas of reach large audiences while increasing under further pressure as smaller emerging markets, as Kuwait-based the variety of products for sale on rivals are increasingly able to source mobile telecommunications company Amazon’s site. standardized business services Zain does in partnership with Citibank from third-party cloud providers in East Africa, and providing higher Information technologies also allow (such as with little education online to students across companies to serve a much wider upfront investment and without the world, a model that the University variety of tastes and needs. The having to manage an IT legacy. of Massachusetts uses to reach most well-known example is how students in China. e-commerce is helping businesses Consumer-to-consumer reach the “long tail” of niche Most senior executives grasp the markets.19 At Apple’s iTunes Store, content potential for disruption—and sense for instance, consumers can purchase Information technology has helped the opportunity. Nearly sixty percent more than 10 million songs across overcome the asymmetry in knowledge of respondents overall said that every genre of music. Similarly, that has traditionally given sellers greater consumer connectivity retailers and individuals can find large the upper hand. In this new phase would have a significant or very international audiences for their often of consumer-to-consumer (C2C) significant impact on competition niche wares using eBay’s marketplace. activity, participants are sharing in their industries over the next five information in open, global online years (see Figure 7). Interestingly, New forms of business-to- forums. Initially taking the form of the response was more emphatic reviews of products and services, this among executives at companies business commerce activity now increasingly encompasses based primarily in emerging markets, Historically, business-to-business (B2B) the mobilization of communities with 68 percent of respondents companies supplied raw materials, to support, discuss or take action in those markets, compared with semi-finished and wholesale goods and about a product, service or project. 56 percent in developed markets, services and, more recently, B2B grew saying that greater consumer to include outsourcing as companies For example, on TripAdvisor’s connectivity would significantly realized the cost advantage of using website, individuals rate and talk affect competition in their industries specialists to undertake more of their about their experiences in hotels over the next five years. non-core activities. Now, outsourcing and restaurants around the world, is moving deeper into activities shifting the balance of market Companies can also harness value by once considered core as technology power from the hospitality sector acting as intermediaries and offering changes the cost basis of those toward the traveler.20 The Now Smell services that facilitate the productive activities—and the ease and exactness This blog brings together perfume activities of others. InnoCentive was with which companies can interact enthusiasts to review scents and is the first global Internet-based hub with their outsourcing providers. an opinion former in the industry.21 designed to help connect “seekers”— This is creating a fundamental change those with challenging research New specialized services are becoming in the way consumers choose what problems—with “solvers”—individuals possible as cloud computing and to buy as they rely increasingly who devise creative solutions to related technologies enable the on information written by peers these problems. InnoCentive itself aggregation of small, individually online rather than on brand history, does not generate solutions; rather, uneconomic pockets of demand marketing or published specialists, it brings together individuals, for business services in areas such for example in consumer reports. companies, academic institutions as procurement, human resources and public-sector and non-profit and data analysis. Amazon, known At the same time, new IT efficiencies organizations that collectively for its online retail presence, and price points are enabling represent more than 200,000 of now offers e-commerce and consumers to share more ideas and the world's brightest minds.18 warehousing services. Li & Fung, information. Some of this is just for previously a trading company, now recreation or entertainment: tweets provides sophisticated procurement of news articles or YouTube videos solutions (for more detail, see are typical. Often, sharing takes the "Case studies: Li & Fung"). form of blogs, many of which provide insight into a particular topic. They range from the mainstream to the niche, such as The London Review of Breakfasts. These tools help individuals 14
  17. 17. keep their networks up to date with Peer-to-peer markets Cooperative consumption the latest trends in their areas of interest, and can provide companies IT has enabled the creation of Social networking tools and other with opportunities to tap into groups models of international production technology developments allow of interested customers. However, the based on cooperative interactions customers to increase their bargaining speed of dissemination of information among individuals rather than power further through “team buying,” has a downside: bad news can spread traditional sources of experience where a group comes together online very quickly, and there are real risks of and trust. Witness the ascendancy to negotiate a discount on a product companies facing serious brand issues of Wikipedia, or the success of or service. from one bad review—which might peer-to-peer lending, especially in providing credit to areas of the Historically, consumer cooperatives even be written by a competitor. developing world where conventional were organized to keep prices fair PatientsLikeMe shows how the model banking services are scarce. and reduce monopolistic behavior. of C2C dialogue has the potential As markets became broader-based to transform the health care and The new capabilities of IT and the and better regulated, there was less pharmaceutical industries. Patients rise of the multi-polar world give need for such models of consumption. with complicated medical problems more power to groups of individual Recently, thanks to IT, the trend has share information with others with producers; in some cases, they remove taken off again. Shanghai-based similar conditions at PatientsLikeMe’s the need for traditional intermediaries, founded in 2003 and selling site, arming each other with the or guardians of trust. Groups of like- everything from paint to ceiling lamps, information needed to engage in minded individuals can now easily had 1.6 million members within five informed dialogue with their doctors “cluster” to reduce their reliance on years, with 300,000 unique visitors and creating samples to test new established companies and have more a day on its site and some 30,000 therapies in large self-organized choice over how goods and services transactions a month during group- standardized trials.22 are produced. These communities are buying events in Beijing, Shanghai, not necessarily driven by pure profit Guangzhou and elsewhere.27 Individuals’ ability and appetite to motives; one example is the Linux generate and distribute their outputs, operating system, which was created In North America, Groupon is a young often seemingly without a profit and is sustained by developers working US company performing the same motive, is in turn rendering that output for free using open-source software.23 function.28 It brings together offers free at the point of consumption. of discounts from local businesses Music, news, opinion, food recipes: Increasingly, peer-to-peer networks and invites members to register their in all these areas, content sharing provide services outside the interest; if enough people register threatens established business models, boundaries of the established on a given day, the offer comes into as demonstrated by the growth of corporation. For example, in online effect. The advantages of this model unsigned bands sharing music on groups such as TechArena Community, are that it focuses customers’ minds, MySpace, the pressures faced by the individuals seek and offer each other lets them know exactly what they newspaper industry, and the closure of experience on how to operate and are getting, and then encourages Gourmet and other magazines. upgrade their computers.24, interested individuals to advertise the a marketplace where individuals lend deal to their networks. Earlier team- Overall, C2C communities can money to other individuals, creates buying models were less effective heighten consumers’ expectations of an alternative to banks for borrowers because they relied on waiting for a companies, potentially reducing their and a new form of investment for critical mass of customers to express ability to create or control their market individual lenders.25 Peer-to-peer an interest in a product before and investor messages and changing production is likely to extend beyond negotiation on discounts could begin. pricing models in a number of the intangible world of ideas, money industries. Many business leaders are and information to communities that Opportunities and aware of the challenge: Accenture’s produce products. Access to low- survey reveals that 57 percent cost production in emerging markets challenges in the changed of executives think the growing continues to broaden; producing ecosystem bargaining power of knowledgeable physical goods at home will be While some of the new market- consumers will significantly affect increasingly possible with the arrival making forces may still be embryonic, competition in their industries over the of affordable 3-D “printers”.26 each has substantive implications next five years (see Figure 7). Leaders for businesses. Most dramatically, of businesses based in emerging competitors or new entrants— markets are especially concerned, sometimes not driven by a profit with 67 percent expressing this view, motive—can harness the new forces compared with 52 percent from in ways that risk subverting existing developed markets. business models, and potentially transforming whole industries. For example, insurance risk assessment could be upended by the combination 15
  18. 18. of location-based technologies, Figure 8: Businesses see management of complex networks as the most significant freely available neighborhood data challenge raised by future developments in IT and analytics software. In health For your company, which of these business challenges will be most heightened by the impact care, social computing may create of IT developments over the next five years? (Select two) new options for drug trials—as well Managing complex networks of suppliers, 37% as a growing reliance by patients business partners and customers on the Internet for medical advice. Nor will government and regulation Protecting proprietary information and data 28% be immune from these forces (see Competition for technologically and analytically “Implications for government”). skilled employees 27% Executives expect new IT-driven Competition from new market entrants 25% business capabilities to have a major impact on competition in their Ability of data-rich large players to dominate 23% the market industries over the next five years. For Diminished ability of the company to protect its example, 62 percent of respondents brand(s) (e.g. due to such developments as online 18% to Accenture’s survey thought the consumer ratings, blogs, recommendation engines) emergence of new, faster or more Increasingly complex regulations for the 12% flexible business processes would have management of data a significant impact on competition Increasing consumer concern over data privacy 10% (see Figure 7). Nearly sixty percent of business leaders thought the same of greater consumer connectivity, and Insufficient Internet connectivity 9% 58 percent pointed to the greater returns resulting from applying Increasing levels of cybercrime 7% insights about customer preferences. Other 1% The changed ecosystem will create challenges, but also opportunities for Don't know 1% achieving high performance. Among the challenges, companies will need to manage more complex networks of suppliers, business partners and Figure 9: Business leaders see IT-related opportunities to improve company performance in multiple areas customers; protect proprietary information and data; compete for Which of the following IT-related opportunities do you see as most relevant to improving technologically and analytically your company’s performance over the next five years? (Select two) skilled employees; and respond to More efficient ways of working (e.g. online training, competition from new market entrants team collaboration across borders, office-less 32% companies) (the four challenges most cited by New possibilities to collaborate with other players in executives in our survey; see Figure 8). the value chain 26% On opportunities, the business leaders Reaching new customer groups 24% we surveyed saw potential to drive performance across many parts of Entering new markets 24% the enterprise, from creating more efficient ways of global working, and Better sourcing and analyzing of data 21% collaborating internally and externally, to reaching new customer groups Involvement of customers in innovation or 20% and entering new markets (the four production processes opportunities most cited by executives Customizing products and services more easily 18% in our survey; see Figure 9). Sourcing of ideas through "open" or collaborative In short, companies have the innovation with third parties (e.g. online communities, 15% universities, "open source" communities) opportunity to do things differently, harnessing the new market-making Integrating more complex supply chains 12% forces to drive high performance. Greater competition among suppliers 8% Other 1% Don’t know 0% 16
  19. 19. Mastering orchestration New information technologies and Figure 10: Few businesses are advanced in their responses to new, technology-enabled the multi-polar world have combined opportunities and challenges to create turbulence in industry To what extent do you feel your company is prepared to deal with the opportunities structures. Although business leaders and challenges you identified? see many opportunities and challenges ahead, few are well prepared: We are significantly advanced in our strategic 11% response Accenture’s research has found that only 11 percent of business executives We have taken a number of steps in our strategic 49% believe that their companies are response, but still have some way to go significantly advanced in their We understand the implications and risks, but 30% strategic response (see Figure 10). have not made significant changes to strategy yet We have yet to prepare for these issues in a The challenge for businesses seeking systematic way 8% to achieve high performance is to We do not feel the need to change our strategy in move from a period of building global response—the company is sufficiently prepared 1% connections to one in which those connections are actively managed Don’t know 1% in new and different ways. In the changed ecosystem, a broader suite of technological and geographic options is available. Orchestrating those connections and relationships requires harnessing the six market- making forces in order to realize the potential for growth and value creation. Public-sector organizations have similar opportunities to deliver policy and services more efficiently and effectively (see “Implications for government”). 17
  20. 20. Figure 11: IT is seen as critical in helping business orchestrate global operations previously, it would have taken seven and a half weeks to deploy them When it comes to managing a global business, to which of the following challenges will IT most help you to internally.31 (For more detail on Lilly’s respond over the next five years? (Select two) strategy, see “Case studies: Eli Lilly and Company.”) In realizing these Reaching customers globally/entering new markets 50% benefits, Lilly’s experience reflects the results of our business leader Encouraging collaboration between employees in different countries 44% survey: 44 percent of respondents saw IT as helping them most with Managing an international workforce 30% encouraging collaboration between employees; 30 percent, managing an Harnessing innovation from overseas sources 22% international workforce (see Figure 11). In order to reach customers Improving access to lower-cost suppliers 18% globally—the most common challenge Improving the environmental sustainability of identified by business leaders (see 11% global operations Figure 11)—computer giant Dell began using Twitter. Users can sign up to Sourcing capital globally 10% follow Dell, receiving messages about discounted products as well as links Improving access to natural-resource inputs 4% to purchase products or to forward the information on to others. Because Other 3% of its choice to open up to consumers on Twitter, Dell saw US$3 million in Don't know 4% additional sales in 2007 and 2008. In 2009, the cumulative sales figure rose to US$6.5 million, as the number of users following Dell on Twitter climbed to 1.5 million. Dell has seen some of the strongest growth in Twitter-related sales come from emerging markets, where broadband What are the opportunities the quality of products and services penetration is rising and adoption (for example, by acting upon customer for high performance? feedback on blogs), deepening of social media is strong among consumers. Dell’s Brazil operation, for Accenture’s research has identified existing revenue streams (using social example, has generated US$800,000 three principal ways in which networks), improving collaboration in just eight months of activity organizations are realizing between employees (through more through its local Twitter account.32 opportunities for achieving high efficient communication tools) and performance in the changed reducing overhead costs (using Extension: Developing current ecosystem: optimization, extension cloud computing). Moreover, the and transformation. maturation and near-ubiquity business in new areas of information technologies Companies can also harness IT to Optimization: Achieving means that most businesses can extend their business models into operational excellence in current very easily harness them. adjacent industries or markets. Google business activities Eli Lilly and Company, for example, offers a good example. The company is using cloud computing to optimize earns the bulk of its revenues from For most businesses, achieving its business. With pressure growing Internet advertising, which made excellence in execution is a perennial to cut fixed IT costs without up 97 percent of its 2008 revenues priority. In times of recession, it is compromising IT service levels during of US$22 billion.33 But now, to tap a key differentiator.29 Optimization the recession, the pharmaceuticals into a new market of Web users, the affords businesses the potential company began working with an company has developed Google Wave, to continue doing what they do, application cloud provider to grant a social computing platform that just better—with lower costs and computing capabilities to its global will allow users to collaborate and increased revenues. IT’s role in network of scientists. As a result, its communicate using richly formatted enabling this is not in question, but scientists can conduct more effective text, photos, videos, maps and cloud computing, mobile computing and efficient molecular modeling more.34 Although free at the point of and other technologies, separately or risk-analysis calculations across consumption, this product extends and in combination, can push that countries and regions.30 Lilly can the company’s business model by contribution to another level. They now have new computer servers getting more people to navigate its afford new players a range of up and running in three minutes; Web pages. Similarly, Google’s free opportunities, including enhancing mobile-phone navigation service, 18
  21. 21. which streams live traffic updates revenues from Safaricom’s data- They continuously seek greater to handsets running on its Android services business segment (which insight operating system, is also envisaged includes M-PESA, text messaging as a future ad-supported service.35 and Internet services). Data services To better understand their global accounted for 18 percent of communities of consumers and ICICI Bank in India has used Safaricom’s total revenues in 2008—an stay ahead of the competition, technology to extend its business into increase of more than 50 percent from companies can use analytics adjacent geographic and IT-enabled 2007—and are likely to contribute an technologies to drive decisions markets—markets that were previously even higher proportion in the future.38 and actions. Good data analysis unreachable. In 2001, the company can help businesses understand launched its Non Resident Indian Smaller companies are also using IT to and manage their performance. (NRI) banking service, which uses disrupt industry dynamics, developing Web-based and wireless platforms business models that could become Collect the right data—with the right to provide the Indian diaspora the industry standards. For example, infrastructure community with e-banking services. prior to Zipcar’s arrival, the choices Forty-two percent of company Money transfers are its core offering for those who needed a vehicle were executives told Accenture that to NRIs, but the product range has to buy, lease or rent. But Zipcar has obtaining more and better data evolved to include savings and deposit established a new model: an IT- will be a strategic priority for their products, structured investment enabled car-sharing service. Zipcar organizations over the next five years options, mortgages, insurance and provides on-demand access to vehicles (see Figure 12). A key to achieving equity-linked products. ICICI has using high-speed Internet, mobile this is to establish the right analytical also introduced a number of product broadband and GPS technology. Users infrastructure. Many companies, variations which appeal to different register online to reserve vehicles, such as online DVD rental service market segments. For example, its and with the use of a “Zipcard,” they Netflix, have incorporated business “NRI Edge” is targeted at affluent can access, unlock and lock, and intelligence technologies from the NRIs seeking a range of priority return their vehicles.39 Alternatively, outset.43 Netflix uses recommendation services and exclusive privileges, while customers can use a mobile app algorithms to predict the movies its a card-based remittance account to find, reserve, access—or even customers will be interested in seeing. allows its customers to draw down sound the horn of—a Zipcar vehicle. Consumers’ movie recommendations NRI money transfers at ATMs in Customers can purchase services in are a key to understanding their India.36 With the NRI service serving increments of as little as an hour.40 preferences—and ultimately a pointer its clients as far apart as Canada and Since the US-based company was to the number of films they will the Middle East, ICICI has extended founded in 2000, it has opened offices purchase. Netflix regularly upgrades its business model into entirely new in Canada and the United Kingdom. its technology infrastructure through geographic—and virtual—territory While it is still relatively small, Zipcar open-source channels.44 A recent (for more on ICICI’s strategy, see has 80 percent of the car-sharing improvement to its algorithm came “Case studies: ICICI Bank”). market, has grown its user base to from a dispersed team of global 270,000 and expects to have 2 million researchers based in Austria, Canada, Transformation: Growing new users by 2014.41 By using technology Israel and the United States.45 business in new areas to work globally, this company is transforming industries: in 2009, Create insight from the data IT can help develop entirely car-rental company Hertz launched its new business models that serve Simply collecting data is not enough. own car-sharing service in Europe and Deriving actionable insight from markets that had previously been North America.42 unreachable—or even unimagined. the data is the critical next step. It can also help reshape industry Indeed, Accenture’s research shows dynamics by setting new standards The instruments of that it is becoming more important that others have to follow. orchestration to develop better data-analysis capabilities. Thirty-nine percent of How can businesses set about the business leaders we surveyed Safaricom, a mobile network operator realizing the opportunities presented expect that investing in better data- in Kenya, is using IT to develop a by the changed ecosystem? What analysis capabilities will form a part new business model and tap into a are the capabilities they can develop of their strategies for responding to new market. The company’s M-PESA to position themselves for effective the emerging challenges—such as service, launched in 2007, offers global orchestration and high greater competition from data-rich customers a way to transfer money performance? Accenture’s research companies—over the next five years anywhere in the country or to make has identified two broad hallmarks (see Figure 12). payments—for instance, school fees of success that will be increasingly and taxi fares.37 Essentially, Safaricom important to underpinning a has transformed its business model company’s competitive performance: by serving an entirely new market first, relentlessly gathering, analyzing in Kenya: mobile banking. In 2008, and using data; and second, developing the increase in demand for M-PESA a broader network of relationships contributed to a 94 percent rise in with stakeholders. 19