Value2.0. Capturing Value From Innovative Technologies
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Value2.0. Capturing Value From Innovative Technologies

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We are at the beginning of an era of true transformational change. The full power of the Internet, globalization and innovative new technologies are coming together, and in doing so, are changing the ...

We are at the beginning of an era of true transformational change. The full power of the Internet, globalization and innovative new technologies are coming together, and in doing so, are changing the rules of business, culture and society. The purpose of this paper is to help
executives understand the new ways in which emerging technologies and principles are enabling value creation through what we call the “new
rules of Value 2.0.”

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Value2.0. Capturing Value From Innovative Technologies Value2.0. Capturing Value From Innovative Technologies Presentation Transcript

  • IBM Global Business Services IBM Institute for Business Value Strategy and Change Value 2.0 Eight new rules for creating and capturing value from innovative technologies
  • IBM Institute for Business Value IBM Global Business Services, through the IBM Institute for Business Value, develops fact-based strategic insights for senior executives around critical public and private sector issues. This executive brief is based on an in-depth study by the Institute’s research team. It is part of an ongoing commitment by IBM Global Business Services to provide analysis and viewpoints that help companies realize business value. You may contact the authors or send an e-mail to iibv@us.ibm.com for more information.
  • Value 2.0 Eight new rules for creating and capturing value from innovative technologies By Matt Porta, Brian House, Lisa Buckley and Amy Blitz We are at the beginning of an era of true transformational change. The full power of the Internet, globalization and innovative new technologies are coming together, and in doing so, are changing the rules of business, culture and society. The purpose of this paper is to help executives understand the new ways in which emerging technologies and principles are enabling value creation through what we call the “new rules of Value 2.0.” Introduction publicly available information to assess these The enabling technologies behind Value 2.0 140 companies, we first identified eight new are the emerging technologies of Web 2.0, rules of Value 2.0. We then polled over 500 social computing, service oriented architec- business experts from among technology ture, 3D Internet and virtual worlds. The focus analysts, IBM business leaders and the of this paper is not on the new technologies venture capital community to gather their per se, but on how businesses are using them insights on how these emerging technologies to improve performance and enable new will evolve and which aspects of Value 2.0 hold means of value creation: what we are calling the most significant opportunities for large here “Value 2.0.” enterprises. In particular, we wanted to discover if the The value dilemma new rules of value creation were applicable Our research shows that while we are living in to large enterprises. To answer this question, an era of vast opportunity for innovation and we examined over 100 start-ups and 40 large growth, executives are deeply worried about enterprises to see how they were leveraging their organizations’ abilities to capitalize on this emerging technologies to create value. Using transformation and thrive.  Value 2.0
  • Why are executives uneasy about entering month and is one of the top 40 most visited 2 such a rich era of innovation? They are worried sites in the world – all with only 24 employees. that their current organizations and business Meanwhile, Apple (iTunes) has revolutionized models will not be able to adapt. A staggering the way consumers buy music and companies two-thirds of the CEOs interviewed in the like it are also disrupting their industry value IBM 2006 Global CEO study stated that they chains with innovative business models. needed to make fundamental changes to their businesses within the next two years. 1 Few enterprises are escaping the impact of this vast cultural and economic force. Those Executives know the rules are changing. A who ignore it do so at their peril. Those who company like Craigslist can create and run understand and act on this new insight will be a site that serves 5 billion page views per positioned to capture real value. 22 IBM Global Business Services IBM Global Business Services
  • Value 2.0 Eight new rules for creating and capturing value from innovative technologies The new rules of Value 2.0 Of the start-ups and large enterprises we As a harbinger of this disruptive change in examined, innovative large enterprises tended business, billions of dollars have flowed in to experiment with multiple new rules of Value recent years into start-ups that are focused 2.0, while technology start-ups tended to focus on emerging technologies. These companies on one to two new rules (see Figure 2). have leveraged emerging technologies to change the way companies and customers FIGURE 2. interact, and have developed new business Number of new rules exhibited by start-ups and models to support these changes. We asked, large enterprises. 45 “Among these start-ups, do any of their busi- 40 Large enterprises ness models or approaches to value creation Startups apply to large enterprises?” 5 Percentage of companies 0 The answer is a definite “yes.” Our research 25 on technology start-ups, and early adopter 20 large enterprises led to the identification of the 5 new rules of Value 2.0, which we then refined based on insights from technology analysts, 0 IBM business leaders and the venture capital 5 community. These rules illustrate unique ways 0 2   4 5 in which emerging technologies are enabling Number of new rules new value creation in the enterprise and fall Source: IBM Institute for Business Value. into three broad categories (see Figure 1). Note: Companies may exhibit more than one new rule; no company exhibited more than five new rules. FIGURE 1. New rules of Value 2.0. New rules of Value 2.0 Capitalizing on new markets Getting closer to your Creating new and business models markets and customers capabilities Grab and monetize the Long Tail Embed flexibility in business Embrace your customers of demand models and information systems Get ready – Your customers Trust the network – It really does Foster rapid, collaborative value digital content know more than you innovation in the enterprise Jump in – Virtual worlds are real Use social networks to create business solutions  Value 2.0
  • Our study of the 140 companies in our Capitalizing on new markets and business sample showed that large enterprises models focused primarily on Value 2.0 in the context The first three new rules focus on expanding of customer intimacy, solutions and social into new markets and creating new business networking. Start-ups, on the other hand, models. In essence, they hold the potential leaned more toward exploiting long tail to capitalize on emerging market opportuni- economics and meeting underserved market ties, develop new revenue streams and grow segments. Both groups, however, had a signifi- market share. Now is the time for enterprises cant focus on value created by harnessing to enter these markets, adjust their business network intelligence (see Figure 3). These model as necessary, and secure first mover results were echoed by the responses to a advantage. separate poll of IBM business and technology leaders. RULE #1: Grab and monetize the long tail of demand For many enterprises, the Pareto principle (or FIGURE 3. Percentage of start-ups and large enterprises “80/20 rule”) is a fundamental business prin- exhibiting particular new rules. ciple. Enterprises tend to focus on the roughly 20 percent of their customers or product mix Long Tail that generates 80 percent of their revenue or Digital content profit. Enterprises have known for a long time that a very broad product selection is not cost Virtual worlds effective – shelf space and inventory costs Trust the network are too high. Therefore, marketing efforts are Embrace your customers geared toward the critical 20 percent of their demand, versus other segments. This cycle Social network solutions is, of course, self-reinforcing. If you only offer Business flexibility limited products and services, people will only Large enterprises Collaborative innovation buy those. Value 2.0 challenges the 80/20 rule. Startups 0 0 20 0 40 50 60 As Chris Anderson discussed in The Long Percent Tail, new technologies have lowered both Source: IBM Institute for Business Value. the cost of accessing customers, as well Note: Sum of percentages is greater than 100% as companies may as the cost of offering a much wider selec- exhibit more than one new rule. 3 tion of goods and services. Grabbing and monetizing the long tail of demand – beyond the core 20 percent – applies both to startups and large enterprises. For startups, a focus on the long tail of demand in their industries has already proven effective. Threadless, for example, enables its customers to design 4 IBM Global Business Services
  • The first three new their own personalized T-shirts which are lished business models and is opening up produced, marketed and sold in very small entirely new markets. Forward-thinking enter- rules are about 4 batches. Another startup, Saltworks.com, prises can take advantage of this by adjusting capitalizing on offers over 100 different retail gourmet salts their business models and business design. emerging market at comparable prices – much more than However, this is not easy. In our research, opportunities and the typical dozen or so salts from the best only 23 percent of the large enterprises and 5 business models to gourmet stores. 17 percent of the startups were attempting to develop new revenue create value based on this new rule. Amazon demonstrates that large enterprises streams and grow can generate real value using this kind of The music industry is a poster child of this market share. approach. For example, Amazon has been trend. Much has been written on how new able to lower its search costs by leveraging technologies are breaking down the traditional social recommendation engines, as well bi-directional, pay-for-use industry business as community marketing effects. The value model. While this has been viewed as a threat created is substantial – nearly 57 percent of by music industry incumbents, overall music Amazon’s book sales are titles that are not consumption is actually growing. People are 6 stocked in a typical “brick and mortar” store. listening everywhere – in gyms, planes, parks, shopping malls. Additionally, music is being This genie will not go back into the bottle – the accessed across all types of devices, from enabling technologies behind Amazon’s mp3 players to phones to laptops. Consumers success are available to all enterprises, and are finding value in the ubiquity and liquidity indeed, are starting to change customer of their digital music, and therein lies the busi- expectations and purchase behaviors across ness opportunity…even as industry value is industries. Customers are increasingly uninter- being visibly (and often painfully) redistributed ested in settling for a less than ideal product, to companies able to reconfigure their busi- service or solution. Enterprises that understand ness elements and business models. and act on this change stand more likely to reap the rewards of Value 2.0. Figure 3 shows New business models are emerging. For that while less than one-third of large enter- example, Prince gave away his “Planet Earth” prises studied were experimenting with value album to several hundred thousand British creation based on this rule, nearly one-half of fans who purchased the Mail on Sunday 7 the startups we analyzed were doing so. newspaper. The band Radiohead released its recent album “In Rainbows” over the Web, RULE #2: Get ready – Your customers value with a “name your own price” model for fans 8 digital content (down to and including a price of US$0). With the explosion of digital content in Both Prince and Radiohead are using these recent years, emerging technologies are giveaways to stimulate demand and buzz, with now enabling new ways to create, share and the objective of generating substantial revenue consume all forms of digital content. This shift through tours and limited-edition content sold is causing dramatic changes in many estab- at premium. 5 Value 2.0
  • “There’s urgency in the industry to representing a new frontier of opportunity. It is estimated that investors have put over US$1 find new ways to monetize content… billion into virtual worlds since October 2006. 11 and the economics of the Internet It has been fairly easy for large enterprises to facilitate this…because it allows for enter this space and explore value creation. a leaner organization while letting Our analysis showed nearly 30 percent of fans dictate the process.” sampled large enterprises were leveraging virtual worlds, compared to only 4 percent of – Peter Lauria, New York Post9 the analyzed startups. Virtual worlds have a variety of potential applications and exciting And this new rule does not just apply to business opportunities for large enterprises. the entertainment industry. Digitization is These applications are enabling Value 2.0 in expanding across diverse industries. For three broad areas: example, motorcycle fans can download ring tones of their bike accelerating. They can also • Creating new markets for virtual buy professional promotional videos of their products and services – The visual, social bikes. And they can create and share their and entertainment aspects of virtual worlds own videos with other enthusiasts, or even buy have created an entirely new market for a virtual bike in Second Life. Although many virtual goods and services paid for in real- companies do not yet realize it, these digital world dollars. These include clothing for user product extensions can be very valuable. In avatars, virtual houses, cars and more, with some cases, they can be worth more than the total spending on virtual goods estimated 12 physical product. 10 at more than US$1.5 billion per year. The popularity of virtual worlds has also enabled While this trend does not currently apply some companies to sell virtual products equally to every industry, within many markets that complement or enhance real-world it is a real and significant opportunity for products, making their overall brand experi- innovative enterprises. The race is now on for ence “longer and stronger” with customers enterprises to develop their innovative capaci- (for example, Mattel’s Barbie). ties and organizational abilities, to change their • Opening a richer direct channel to business models, and to capture Value 2.0 customers – Virtual worlds such as Second generated by ubiquitous digital content. Life represent a new channel to customers and provide new opportunities to advertise RULE #3: Jump in – Virtual worlds are real and market real world products/services. business The interactivity and social aspects of this Virtual worlds and other three-dimensional medium provide extra value in customer (3D) online environments were born in the interaction, above that of a simple Web massively-multiplayer online game (MMOG) page or B2C/B2B site. This direct channel arena. However, they have quickly evolved to to customers is more akin to what channel become one of the hottest areas of Value 2.0, partners and retailers have traditionally offered in the real world, further disrupting the value chain. 6 IBM Global Business Services
  • The second set of new • Enhancing collaboration and commu- Getting closer to markets and customers nication – As MIT Professor Irving The next set of rules illustrates how large rules emphasizes creation Wladawsky-Berger stated at a recent confer- enterprises can create new value with of value by getting closer ence, “Meetings and learning and training emerging technologies by becoming more to customers and markets, may very well be the ‘killer app’ for virtual intimate with customers, gaining better infor- obtaining useful insight 13 worlds.” Enterprises are becoming increas- mation and insight from the social Internet, from the social Internet and ingly more distributed across geographies. and forming community experience around developing a community Their knowledge ecosystem is becoming customer solutions. fragmented across employees, partners and experience around customers. To thrive in this hyper-distributed RULE #4: Trust the network – it really does customer solutions. world, an enterprise needs to help ensure know more than you that its employees connect and collabo- The Internet offers deep, broad, and widely rate. Face-to-face meetings are expensive accessible information worldwide. And busi- and time consuming, yet conference calls nesses are learning to tap this information lose much in the way of the social capital source in new ways. Of the large enterprises created through personal interactions. we studied, 50 percent were addressing value creation by tapping into network intelligence, Telepresence is one way to bridge this gap. compared to nearly 47 percent of startups. Telepresence refers to a set of emerging technologies that help connect people by If Web 1.0 was about putting basic product allowing them to feel that they are physically information on the Internet, Web 2.0 is about 14 present at another location. For example, a rich commentary on all things by almost IBM is currently holding new employee training everyone, including consumers, experts, trend- sessions in Second Life in order to allow setters, the average person on the street and employees regardless of geography to “meet” the not-so-average. in a virtual world. The goal is to offer a richer Mining this information for business intelli- experience than a conference call. gence and insight is just beginning. Emerging Simultaneously, advances in video streaming Web analytics technologies are making are another set of technologies being used to it possible to obtain much more valuable support virtual collaboration. Since 3D worlds insights from the social Internet and the rich, and video streaming are both converging in heterogeneous data resulting from online this space, many experts see a combination social networks. Large enterprises not only of both video and 3D Internet technologies need to recognize that this intelligence exists, providing the best platform for virtual commu- often outside their current knowledge sources. nication and collaboration via telepresence. But they must also have the right mindset, processes and tools in order to tap into, accept, and act upon the collective wisdom of the masses.  Value 2.0
  • There are many valid privacy concerns that will tion. Value 2.0 is then created, as enterprises need to be addressed as this area matures. leverage this participation from customers to But the new, more socially interactive Internet gain realtime input. is a tremendously valuable source of informa- tion on customers, markets, competitors and A second way emerging technologies enable other key concerns for a business. Enterprises new value through customer intimacy is via that move quickly here may well be rewarded “crowdsourcing” and “crowdsupport.” These with superior insights on sales and market terms refer to enlisting customers to directly trends, new product ideas, competitive intel- help an enterprise in every aspect of the life- ligence and operational issues. cycle of a product or service. For example, in the consumer world of Web 2.0, an organiza- RULE #5: Embrace customers tion like Wikipedia and virtual worlds have Staying close to customers has been a been able to leverage the small group of users business battle cry throughout the ages. willing to give their time and energy to create Leading organizations have historically sought content for the larger community to use. This customer input in every stage of the lifecycle same principle applies to crowdsourcing and – from design to marketing to distribution and crowdsupport. A large enterprise can enlist its sales, to after sales support. The traditional small group of highly dedicated users to help ways to engage customers – via focus groups, improve the overall quality of its products and surveys and industry experts – are expensive services for all; often these users will do this and limited. Today’s emerging technologies for free. For example, Nintendo has had great enable a new level of customer intimacy by success with a program, described in detail changing the way enterprises connect and later, which engages its dedicated users in all build customer relationships. Enterprises can aspect of its business from design to customer 15 move from knowing the customer to truly support. Its success indicates that large embracing the customer. This is another rule of enterprises can benefit from this approach value creation that is getting substantial atten- as well as the start-up or pure-play Internet tion, both in large enterprises and startups. company. Our analysis found 55 percent of large enter- As emerging technologies make it easier to prises and 45 percent of startups creating connect with customers, it becomes easier Value 2.0 by embracing customers. for enterprises to find and encourage those First, emerging technologies enable greater small groups of highly dedicated users who customer intimacy by increasing the ease of are willing to help other users get the most access to customers and lowering the relation- out of these sites, advocate the brand, spread ship barrier. Customers are already online and the word and contribute content to make the many are already discussing and commenting product/service/solution even more valuable. on every aspect of products and services. The result of embracing the willingness of Enterprises that encourage free-form discus- some customers to directly support a business sion around their products and services can is Value 2.0, through: better product/service/ start building a rich community of participa-  IBM Global Business Services
  • The third set of new rules solution quality, a better brand experience and • Creating advocates for the company in the lowered costs to serve new customers with a increasingly transparent world of the social is about the value the richer interface. It is expected to remain a win- Web, where information and misinformation enterprise can gain by win relationship for both an enterprise and its disperse instantaneously. building new capabilities customers. that are enabled by With global competitive pressures increasing, large enterprises are taking this rule of Value emerging technologies. RULE #6: Use social networks to create solutions 2.0 to heart. Our research showed 55 percent Selling business solutions instead of products of large enterprises and 37 percent of startups or services alone is an established strategy exploring Value 2.0 through social networks of many large enterprises. Solutions require and corresponding solution ecosystems. better integration across business partners Creating new capabilities to meet client needs. Innovative technologies This next set of new rules focuses on Value like Web 2.0 have opened up an entirely new 2.0 enabled by emerging technologies inside dimension to integrate an ecosystem. That the enterprise to build capability. Flexibility of is why creating ecosystem solutions through business models and systems is becoming social networks is a new rule of Value 2.0. a critical aspect of creating value in today’s Apple’s iPod ecosystem is the foremost marketplace, especially as disruptive forces example of this socially-driven, Web-based incapacitate existing enterprise models. solution. In creating iTunes, Apple integrated Fostering rapid, collaborative innovation is content, devices and community into a busi- another key theme to staying competitive in ness model. Combining the entire music today’s marketplace. ecosystem around one solution gave Apple RULE #7: Embed flexibility in business a true competitive advantage, and helped it models and information systems secure 70 percent of the PC-based digital 16 Traditional business models, processes and music market. information systems have been built to be Social networks, enabled by innovative tech- as efficient and effective as possible, but the nologies, are critical components for creating ability to quickly adapt has not traditionally these Web-based solutions. As rule #5 shows, been a top requirement. Not surprisingly, this online social networks empower loyal brand new rule applies mostly to large enterprises, as advocates to enrich the user community. More startups tend to be more flexible and adapt- specifically, social networks can drive value in able by nature. Of companies studied, 45 these key areas: percent of large enterprises were exploring Value 2.0 opportunities to improve flexibility, • Building loyalty, trust and camaraderie in an compared to only 2 percent of startups. increasingly mobile and global marketplace • Fostering innovative discussion and support Business leaders understand that this must among online communities with committed change. All aspect of the enterprise should participants, expert users and early be designed not only to optimally perform the adopters task at hand, but also to enable rapid change to drive superior performance. Enterprises  Value 2.0
  • poised to capture Value 2.0 embrace this innovation have been lowered. Innovation can fundamental need for flexibility and are now be fostered and developed anywhere in building this capability across their enterprises, the enterprise. Enterprises no longer require including: centralized research departments to be the • Rethinking overall business design, taking a sole contributors to the innovation pipeline. modular/component view of the enterprise Social networking technologies and other that structurally is a more flexible model collaborative tools enable more functions within the enterprise to drive innovation at a • Making hard decisions about which activi- grassroots level. ties belong inside or outside the enterprise, based on a deeper understanding of which Most importantly, enterprises are starting to components are truly a source of competi- recognize that speed is often more important tive advantage than perfection when it comes to innovation. • Adopting a service oriented technology “Failing fast and failing cheap” or “launch architecture that translates the business and adapt” are strategies that echo the Web 17 component model into IT services that 2.0 paradigm of the “perpetual beta.” In this support superior business performance respect, large enterprises need to shift their today and greater IT flexibility tomorrow – all thinking and learn a great deal from multiple at a lower cost. inexpensive, rapid failures, rather than learning a little from a single launch event. These approaches to flexibility can reduce the internal cost of quickly adjusting to market Finally, new metrics must also be developed forces and enable the enterprise to succeed in to understand Value 2.0. Return on invest- an era of accelerated change. ment (ROI) is useful to a certain degree, but it often does not capture opportunity costs of RULE #8: Foster rapid, collaborative missed innovation, network effects or value innovation in the enterprise from communities. Restrictive metrics, along In the Value 2.0 environment, new ways to with restrictive control of ideation and incuba- collaborate and share knowledge, joined with tion can stifle innovation as well. Management greater transparency, are creating new forms systems need to adapt to create Value 2.0 of collaborative partnerships while lowering the through a “grassroots,” collaborative innova- cost of innovating across enterprise silos. tion approach. This evolution is underway, but creating a new innovation mindset across the Collaborative tools and social networking tech- marketplace takes time. Among companies nologies are already providing higher levels of surveyed, only 5 percent of large enterprises transparency and collaboration among orga- and 1 percent of startups were focusing on nizations and their partners, customers and Value 2.0 in this respect. employees. At the same time, cost hurdles for 0 IBM Global Business Services
  • Large enterprises are The new rules in practice – Large By the mid-2000s, it faced serious challenges reaping benefits from enterprises enlist Value 2.0 as its worldwide share of video game consoles The examples below illustrate the impact that dropped from 61 percent during the days of using the eight new the new rules, used alone or in combina- 16-bit game consoles to just 22 percent as rules – alone or in the new 128-bit game systems were taking tion, can have on the performance of large combination – in terms enterprises. These organizations let networks 18 hold of the marketplace. These new 128-bit of greater market share do the work of creating, disseminating and game consoles were launched by Nintendo’s and customer intimacy. amplifying knowledge. They reap benefits in competitors and, because of their technical terms of greater market share and customer superiority, were appealing to traditional hard- intimacy. These Value 2.0-enabled enterprises core gamers (18-26 year-old males). are rapidly launching products and services The company’s challenge was to attract that have been suggested, tested and co- new customers without alienating hardcore created by communities. They are better able gamers. To help with this, Nintendo launched to change business models quickly and apply a community platform on the Web, offering niche marketing tactics, for example, without incentives in exchange for product registration, alienating their core customer bases. Their feedback and profile information. Information communities can guide them about which captured this way provided critical customer offerings to grow, which to maintain, and which insights that led to a loyalty program with a to exit gracefully. status aspect. “Sages” are an elite group of Embracing customers helps Nintendo experienced gamers, handpicked by Nintendo regain market share staff based on the value and frequency of Creating and capturing Value 2.0 is not an their community posting. In return for leading isolated event or a “quick win.” Value 2.0 is forums and helping new users, they have created as a result of deliberate, thoughtful access to exclusive game previews and other strategy about far-reaching business issues, one-of-a-kind benefits. taking into account new rules of value creation By embracing customers through a Web- and the technologies that can enable them. based community with crowdsourced “Sage” Nintendo has recaptured a market leadership support, Nintendo was able to reconnect position in game consoles thanks to several with older, casual male gamers, as well as factors: embracing customers more closely women – two atypical segments for console than competitors; reaching new customer game devices. Nintendo, through its under- segments with insight from these close rela- standing of customers, provided users with tionships; and enabling a vibrant customer intuitive game controls in the Wii system, as community. well as an online game library full of “nostalgic” After the early 1990s, when Nintendo held a game content – especially appealing to non- strong leadership position and a market share traditional customer segments. of 68 percent, competition greatly intensified.  Value 2.0
  • FIGURE 4. thousands, hundreds of thousands and even Nintendo regains market share. millions of people. WorldJam was the initial experiment to prove the power and ability of 0 the IBM intranet to connect and tap into its workforce. Over 50,000 employees partici- Percent Nintendo market share 60 pated and as a result of this success, IBM 50 realized that there were broader applications. 40 Subsequent jams held over the next five years 0 tackled big issues: company values; prag- 20 matic solutions for growth and, most recently, 0 new market opportunities based on IBM R&D Early 0s Mid 0s Early 2000s Today capabilities. Jams have become part of IBM’s 0 (Super NES) (Nintendo 64) (Nintendo (Nintendo Wii) Gamecube) management system, used as a collabora- tive management tool with a distinct business Note: Based on worldwide game console shipments. Source: VGChartz.com, “Worldwide Hardware Shipments”, purpose, clearly understood objectives and October 2007, and Nintendo Co., Ltd. desired outcomes. Participation in these events increased six-fold between 2001 and 2006 (see Figure 5). Today, with 42 percent market share (see Figure 4), Nintendo has recaptured the lead over its News of these events resulted in requests for competitors for the latest generation of game IBM to help other organizations set up their 19 consoles. By embracing customers and own jams, including the World Urban Forum bringing brand advocates – Sages – inside for the United Nations’ Habitat for Humanity enterprise boundaries to provide key customer office and the Canadian Government, and an support and product feedback (in return for industry association, the Original Equipment status, rewards and recognition), it created and Suppliers Association, based in the United 20, 21 captured Value 2.0. States. Frequent impetus for these Jams includes the need to drive change in culture, IBM changes its culture… and helps others values or strategy. For example, global tele- do likewise communications equipment provider Nokia In 2001, IBM faced serious hurdles in engaging Siemens Networks held a jam to create new over 300,000 employees worldwide to drive values after the merger of two large and cultur- the kind of change needed to maintain its ally different companies. In addition, global market leadership. To meet the challenge, it consumer electronics manufacturer Nokia created “WorldJam,” the first of a series of developed ideas to realize the company’s new massive, online discussions using the Internet strategy, with its new values from the jam as a to support conversations among tens of framework. 2 IBM Global Business Services
  • FIGURE 5. IBM Jams: Collaborative innovation evolution, 2001 to 2006. 37,000 32,662 2,800,000 2,378,992 72 72 72 1,016,763 54 9337 6046 268,233 Hours Posts Views Hours Posts Views Hours Posts Views Hours Posts Views WorldJam 2001 ValuesJam WorldJam 2004 InnovationJam A new collaborative medium An in-depth exploration of Focused on pragmatic solutions For the first time, IBM clients, to capture best practices on 10 IBM values and beliefs by around growth, innovation and business partners and even our own urgent IBM issues employees bringing the company’s values to life family members joined in a new exercise in Collaborative Innovation Source: IBM Jam Program Office. Initially a tool for social dialogue focused • Where is the “tipping point” of social on cultural change, jams have expanded to software and emerging technology adoption become an enabler of Value 2.0 by harnessing among your current customer segments? the power of grassroots, collaborative inno- What does that tell you about your current vation. They serve as one example of many marketing strategy? in which Value 2.0 is created and multiplied • In what ways can you harness the liquidity through enterprises as disjointed, dispersed and ubiquity of digital content in your employees are connected to share knowledge, marketplace? Which customer and partner collaborate and drive innovation. segments are your earliest indicators of this impact? Several important questions Creating Value 2.0: A critical can help guide enterprises proficiency for large enterprises • What are the most information-intensive elements in your value chain? How is digiti- to deal successfully with the Questions to consider zation impacting those elements? Can your confluence of three major business model handle those changes? Capitalizing on new markets and business trends – changing consumer models • With virtual worlds, how can 3D visualization preferences, intensified • What are the underserved segments in your plus multi-user socialization enhance your globalization of competition marketplace? What have been the traditional products, services, brand image or even and the proliferation of barriers to serving them – cost, impact on internal capabilities (such as training and existing customer segments or channel learning)? social technologies. partners? • How can a virtual experience become a brand enhancer for your enterprise?  Value 2.0
  • Getting closer to markets and customers • What social connections do you encourage • What organizational barriers prevent you outside of purely professional interaction? from inviting your customers inside your • Which passions, interests and expertise organization? areas of your employees go unharnessed? • What is your enterprise’s ability to gather What if they could pour those passions and extract value from the unstructured and energies into communities focused on social interaction and heterogeneous data product development, sales and marketing, among you, your customers and partners, service delivery or innovation? as well as among customer segments? Value 2.0, when harnessed effectively, can be • How do you build and offer a rich experi- a significant source of advantage for large ence or community around your products enterprises. Indeed, in the coming years, we and services? In what ways can you stand anticipate that a Value 2.0 approach will evolve out from the clutter of “me too” communities from being a “nice to have” initiative to being and truly offer your customers something of a critical capability for global corporations. value? The confluence of three factors – changing Creating new capabilities consumer preferences driven by the millennial • What is your company’s “permission to generation, intensified globalization of compe- innovate?” Are your non-R&D employees tition, and the proliferation of fast-evolving given explicit time or permission to focus social technologies that connect people and on innovation and ideation? How do your ideas – is what we believe will make Value 2.0 management systems encourage innovative proficiency critical for global corporations in all contributions outside of normal productive industries. Value 2.0 will take hold at different work? paces in different industries, but make no mistake about it – employees, customers, part- • How socially connected are your ners and competitors are changing how they employees? Compare that with the interact with each other. Innovative, emerging geographic distribution and isolation of your technologies are becoming the key enablers remote workforce. for large companies to deal with these disrup- tions and remain competitive. 4 IBM Global Business Services
  • Authors Contributors Matt Porta is the global leader of IBM’s In the spirit of collaborative innovation, Technology Strategy Consulting Practice and many colleagues throughout IBM and SOA Transformation within Global Business beyond – venture capitalists, analysts, Services. He can be reached at matt.porta@ and others – contributed to this paper. In us.ibm.com. particular, this paper would not have been possible without the substantial contribu- Brian House is a Senior Consultant in IBM’s tions throughout the research of Anubha Strategy and Change practice in Global Jain, Bindu Oleti and Prasanna Pownsubbiah. Business Services. His focus is on business The authors would also like to thank Wataru model innovation, growth and marketing Sasamoto and his team for their contributions strategy, and the strategic implications of inno- in identifying innovative start-ups. Thanks vative technologies. He can be reached at as well to Ray Bedard, Saul Berman, Marc bhouse@us.ibm.com. Chapman, Eiji Hayashiguchi, Elissa Houchin, Lisa Buckley is a Managing Consultant Deborah Kasdan, Aaron Kim, Bernie Michalik, in IBM’s Global Business Services, where and George Pohle, all of IBM, as well as she focuses on IBM Jams: Collaborative Mark Raskino of Gartner and Oliver Young of Innovation, as well as innovative technolo- Forrester for their insights and suggestions gies and community building. She can be along the way. contacted at lbuckley@us.ibm.com. Amy Blitz is the Strategy and Change Lead for About IBM Global Business Services With business experts in more than 160 IBM’s Institute for Business Value within Global countries, IBM Global Business Services Business Services. She can be reached at provides clients with deep business process ablitz@us.ibm.com. and industry expertise across 17 industries, using innovation to identify, create and deliver value faster. We draw on the full breadth of IBM capabilities, standing behind our advice to help clients innovate and implement solutions designed to deliver business outcomes with far-reaching impact and sustainable results. 5 Value 2.0
  • References 11 “$1 Billion invested in 35 virtual worlds 1 IBM Corporation. “Expanding the Innovation companies from October 2006 to October Horizon….” March 2006. www.ibm.com/gbs/ 2007 Virtual Worlds Management. October .” ceostudy. 2007 http://www.virtualworldsmanagement. . 2 com/2007/index.html. Wikipedia. Entry for “Craigslist.” http:// 12 en.wikipedia.org/wiki/Craigslist, based Wu, Susan. “Virtual Goods: The next on alexa.com Internet traffic data from big business model.” Techcrunch.com. 12/29/2006. Accessed on October 29, 2007 . June 20, 2007 http://www.techcrunch. . 3 com/2007/06/20/virtual-goods-the-next-big- Anderson, Chris. “The Long Tail.” Wired. business-model/. October 2004. http://www.wired.com/wired/ 13 archive/12. 0/tail.html. 1 Wladawsky Berger, Irving. “Killer Apps and 4 Virtual Worlds.” Always On. August 7 2007 , . http://threadless.com. Accessed on http://alwayson.goingon.com/permalink/ 7/25/2007 . post/16876 5 http://www.saltworks.us. Accessed on 14 Wikipedia. Entry for “Telepresence.” 10/18/2007. http://en.wikipedia.org/wiki/Telepresence. 6 Anderson, Chris. “The Long Tail.” Wired. Accessed on October 29, 2007 . October 2004. http://www.wired.com/wired/ 15 Hall, Kenji. “Nintendo Gives Design archive/12. 0/tail.html. 1 Power to the Player.” Business Week. 7 “Prince album set free on the Internet.” BBC September 27 2006. http://www. , News. July 16, 2007 http://news.bbc.co.uk/2/ . businessweek.com/globalbiz/content/ hi/entertainment/6900792.stm. sep2006/gb20060927_472864.htm?chan=tc& 8 Maki. “Radiohead’s In Rainbows: A Look at chan=technology_technology+index+page_ Anti-Marketing in the Music Industry.” Dosh more+of+today’s+top+stories. Dosh. http://www.doshdosh.com/radiohead- 16 Borland, John. “iTunes outsells tradi- anti-marketing-in-the-music-industry/. tional music stores.” CNET News. 9 Lauria, Peter. “On the download: Using ads, November 21, 2005. http://www.news.com/ new online label offers music free.” New York iTunes-outsells-traditional-music-stores/2100- Post. June 11, 2007 http://www.nypost.com/ . 1027_3-5965314.html. seven/06112007/business/on_the_download_ 17 O’Reilly, Tim. “What is Web 2.0: Design business_peter_lauria.htm Patterns and Business Models for the 10 Berman, Dr. Saul, Steven Abraham, Bill Next Generation of Software.” O’Reilly. Battino and Louisa Shipnuck. “Navigating http://www.oreilly.com/pub/a/oreilly/ the Media Divide: Innovating and enabling tim/news/2005/09/30/what-is-web- new business models.” IBM Institute for 20.html?page=4. Business Value. February 2007 . 6 IBM Global Business Services
  • 18 “Worldwide Hardware Shipments.” VGChartz.com. Accessed on October 30, 2007. 19 “Hardware Comparison Charts.” VGChartz. com. Accessed on August 27,2007. 20 Reuters. “Nintendo market value surpasses ₤42 billion.” October 16, 2007 http://news. . cnet.co.uk/gamesgear/0,39029682,4929341 5,00.htm. 21 Nintendo Co., Ltd., “Annual Report 2006.” March 31, 2006. http://www.nintendo.com/ corp/report/06AnnualReport.pdf.  Value 2.0
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