Siemens 2012 PLM Conference - IBM Keynote by Paul Brody


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The IBM keynote presentation at the Siemens PLM conference in Phoenix, Arizona. Presented by Paul Brody on 12 March 2012.

This document contains a view of how I think product development strategy is changing in the electronics industry, particularly in my role as the electronics industry leader.

These are my personal views and while they are presented in my capacity as an IBMer, this document shouldn't be considered an official viewpoint on the industry from IBM or an official statement of IBM's corporate strategy. The view expressed in this document is just one perspective among many that exist within such a large and diverse consulting & technology organization.

The summary message of the document is that we are entering a new era of product development - one in which our old certainties are no longer reliable.

In the past, we really focused on developing products - specific physical items. More recently, companies like IBM and others moved to develop systems and services - networks of products and solutions.

Today, we are about to enter a new era - one where we design solutions targeted at business models. Thinking not just about performance metrics of a device or results of a business process in a system - but end-to-end business performance.

This is very very difficult to accomplish, but if we can do so, we can reap enormous rewards, face few competitors, and generate enormous value for our clients.

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  • Tiresomely repetitive predictions of change“Will someone tell the Internet of things to shut-up” – GigaOmFeels like TomorrowLand at DisneySome of the predictions feel irrelevant for my industryI don’t sell to consumersI don’t care what’s going on at FacebookNobody’s going to give my product away for freeEveryone wants to keep calm and carry onI beg to differ.
  • Analytics: from descriptive, to prescriptive to self-awareSocial Networking: from acute (periodic posting, usually TMI) to ambient (continuous and automatic) – human telemetryConnectivity: from LTE  WiFI (expensive to cheap)
  • Where Social Networking meets AnalyticsUsing data from interactions and file systems, we can predict which engineers are your most productiveWe can predict which engineering concepts are most likely to succeedWe can tell which of your engineers are risk takers and which ones are dependably conventionalWhere continuous connectivity meets social networkingWe can change user behavior with very subtle nudgesWe make habits and we can break themWe achieve huge insights into mood, behavior, health and state of mindWe can predict mistakes and fatigue – and intervene
  • Product Life Cycles:We’re used thinking about them as getting shorterNow they’re getting longerProduct & Systems DefinitionProducts are getting simpler and variants fewerBUT systems are becoming vastly complexUser ExperienceConsumer-grade experience meant easy but not robust or “enterprise class”Enterprise-class was not expected to be so  but now it is and it mattersWhat kind of user is needed to operate or service your systems?What kind of skills and education do they have?We can’t say RTFM anymore
  • Value comes from software, content and services so the device itself becomes less criticalProduct transitions destroy profitabilityOrganizations and consumers are not able to absorb the full pace of changeCase Example: In Government / Enterprise:Longer aircraft life cyclesCase Example in Consumer:Longer phone & PC life cyclesUS car
  • Products are becoming simpler, with fewer variantsConsumer space: fewer phones, varaints, more “one size fits all”Cell phone companies coming to market with far fewer products & variantsEnterprise space: fewer models, versions, variantsBoeing eliminated many options/ choices on the 787 to keep cost downSystems complexity, by contrast, is increasing dramaticallySystems are becoming self-organizing and self-awareCase Example: heterogenous wireless networksBlend WiFi with 3G and 4GBlend on-site radios with cloud systemsCell sites change shape and area based on demand, usageOptimization is continuous and automatic
  • Remember when the smart-alec at the help desk told you to RTFM?User experience design is now based on consumer standardsProcesses that would have been considered fine in the past are now considered brokenWhat’s driving this:The War For TalentGlobal shift in skills, locationsBusiness model transformation – what skill does it take to use your product? How does that person cost and how much time do they take
  • New technologies let us do all kinds of cool thingsUnderstand how our products are being usedManage and monitor them in the fieldOptimize user behaviorBuild hybrid and self-aware systems & solutionsThis is changing the business models that we can deploy:We can offer services and solutions instead of productsWe can shape how products are usedWe can offer new features on existing hardwareThe result is a new era in product development
  • The Three Eras of Product Design:Then: Era 1: Product DesignNow: Era 2: Systems EngineeringNext: Era 3: Business Model DesignWe’re entering into the era of business model design
  • When we made products, they got commoditizedTo stay ahead, we shifted towards to software and servicesServices also became, to some degree, commoditizedWe invested in consulting and solutions vision, but customers kept unbundling usTo push the envelope we started designing business models and signing up resultsTelecom case example: All three “eras” are present in the IBM portfolio todayEra 1: You can buy IBM hardware for your telecom data centerEra 2: You can buy software and services solutions such as outsourcingEra 3: We sign up to run your IT organization and Critical end-to-end business processes and we guarantee increased BUSINESS RESULTS to our customers.
  • When we made products, they got commoditizedTo stay ahead, we shifted towards to software and servicesServices also became, to some degree, commoditizedWe invested in consulting and solutions vision, but customers kept unbundling usTo push the envelope we started designing business models and signing up resultsTelecom case example: All three “eras” are present in the IBM portfolio todayEra 1: You can buy IBM hardware for your telecom data centerEra 2: You can buy software and services solutions such as outsourcingEra 3: We sign up to run your IT organization and Critical end-to-end business processes and we guarantee increased BUSINESS RESULTS to our customers.
  • What Business Are We In?Do we make communications gear, or do build & operate mobile networks?Do we make trucks or are we in the logistics business?Do we make weapons or are we peacekeepers?Do we operate mobile networks or are we an capital asset leasing business?Who is our customer?Users aren’t always the same as customersIf you use Facebook, you’re the product, not the customerIf you advertise on Facebook, you’re the customer
  • SpectraYield buys harvesters and other farm equipment and modifies it to provide detailed real-time telemetrySepcraYeild gives this equipment to farms for free or at deeply discounted costs compared to buying the equipmentSpectraYield uses the data flow to enable profitable real-time commodities tradingIn this case, the customer is wall streetFarmers are the productIt’s the Facebook model applied to B2B
  • We’re elevating the importance of industry skills across our organizationIBM Academy of TechnologyIBM Industry Academy --**NEW**New Global CoCs make our top industry talent deployable anytime anywhereWe’re integrating our organization to focus on solutions that create valueBye-bye software group: hello the new STG that includes hardware & software togetherNew STG is investing heavily in industry skills (more retail experts in STG than GBS)Appliances like Netezza – everything in one package, ready to go
  • Siemens 2012 PLM Conference - IBM Keynote by Paul Brody

    1. 1. March 2012The Death of Product Design:How Continuous Connectivity, Social Networks and Big Data Are Killing ProductDevelopmentPaul BrodyGlobal Industry Leader, ElectronicsIBM © 2012 IBM Corporation
    2. 2. Product design as we knew it is dying. The suspects: a trio of newtechnologies Continuous Connectivity Social Networking Information Analytics2 Confidential Material © 2012 IBM Corporation
    3. 3. One more analyst report. One more presentation. These mega-trends are starting to feel like clichés – and irrelevant ones at that Dire predictions of transformation are starting to feel a dated exhibit in TomorrowLand.3 Confidential Material. Tomorrowland Image creative commons license, Flickr user Big Dump © 2012 IBM Corporation
    4. 4. Despite the hype, interesting things are happening that have bigimplications for how we develop & use every kind of product Connectivity Simpler Faster Radically Cheaper Social Networking Detailed Accurate Completely Automatic Analytics Smarter Self-Aware Self-Organizing4 Confidential Material © 2012 IBM Corporation
    5. 5. The most interesting things are happening at the intersections ofthese trends - innovation in a rich edge environment Change behavior and results Connectivity Social Analytics Networking Predict behavior and results5 Confidential Material © 2012 IBM Corporation
    6. 6. The result: old certainties about product development – what we doand how we do it, are going away Continuously Life Shorter Longer Cycles More Product Complex Simpler Definition Static & User Functional Dynamic & Experience Consumerized6 Confidential Material Clock, Blueprint, and Screen Images creative commons license, Flickr users © 2012 IBM Corporation
    7. 7. Longer product life cycles are a result of changing business models– both in the consumer space and in industrial Extended life High reliability is Life cycles rising cycles enabled raising average from 6 mos to 1 by retrofits and fleet age and year due to lack government slowing some of differentiation procurement refresh cycles cycles.7 Confidential Material © 2012 IBM Corporation
    8. 8. Product complexity and variation are actually declining (but systemscomplexity is exploding) Simpler Products Complex Systems Heterogeneous Next Generation Mobile Networks WiFI LTE HSPA Small Cells • Snap together approach • 10-1000X increase in • Fewer parts, variants network complexity • Significantly reduced • Smart, self- options & customization organizing, self- optimizing networks8 Confidential Material © 2012 IBM Corporation
    9. 9. User experience transformation – it means the end of RTFM From Static to Dynamic: • A/B Testing, Continuous Change & Refinement • Gamification – to optimize user behavior • Simplification – to drive User Profiles Are Changing lower operating costs • Fewer operators = lower costs • Lower qualifications = lower costs Influenced by the Facebook • Faster time to productivity = lower costs generation, enabled by • Modern UI = Better Recruiting continuous connectivity9 Confidential Material Cockpit Crew Image creative commons license, Flickr users © 2012 IBM Corporation
    10. 10. What’s driving the end of all the traditional certainties in productdevelopment? Business Model Transformation … in the service of business model All these changes… transformation • Annuity Revenue Streams: with transition from products to services Life Cycles • Reduced Risk: Fewer options and longer cycles means lower turn- over and component risk Product Definition • Increased Margins: Add new revenue streams on existing hardware & devices User • Reduced Operating Costs: thanks Experience to labor arbitrage and user experience design10 Confidential Material © 2012 IBM Corporation
    11. 11. So if we’re not focused on products anymore, what are we doing?Products  Systems & Services  Business Models11 Confidential Material ATC, and Airline Hub Images creative commons license, Flickr users © 2012 IBM Corporation
    12. 12. The search of sustainable competitive differentiation is driving thechanges in business model operations Product System Business ModelMetrics • Speeds & Feeds • Process Metrics • Business Metrics • One-time sale • On-going services • Deep strategic relationship partnershipCompetition • Can be replicated & • Solutions can be • Hardest to commoditized unbundled & value replicate, unbundle can migrate or replace12 Confidential Material © 2012 IBM Corporation
    13. 13. What does this really mean for a company like IBM as we thinkabout engagement with our clients Product System Business ModelOffering • Intel-Based Servers • Integrated Point of Sale • Partnerships for growth Solutions & profit • Price/performance • Transaction cost • Total business profitMetrics benchmarks • Retail staff productivity and revenue growthCompetition • Intense • Limited • Very fewClient Value • Low • Medium • High13 Confidential Material Airtel Shop Image creative commons license, Flickr users © 2012 IBM Corporation
    14. 14. To re-shape our business, we have to ask two fundamentalquestions. (Over and over again) What • Creating IT systems? • Offering business services? business are we in? • Solving business problems to make our clients successful? • Consumers? Who is our • Enterprises? customer? • They were customers. Now we call them clients.14 Confidential Material © 2012 IBM Corporation
    15. 15. When you re-think the fundamental questions you get surprisingbusiness models. Case in point: SpectraYield John Deere makes tractors for …Spectrayield makes data for farmers financial markets • Optimal planting time & • Yields, output conditions location • Futures & derivatives • Device maintenance and • Market size & marketing performance data for B2B services • Customer needs & • Shared ownership product insight models & finance Using data generated by connected Harvesters, Spectrayield customers can cover as much as 100% of their equipment leasing costs15 Confidential Material Image: Flickr, CC License, Dustin and Jena © 2012 IBM Corporation
    16. 16. When you change your business model, all your design and supplychain thinking has to change as well  Product  Service – Printer – Price per page – Toner – Everything included – Service  Printer is designed for low-  Device is networked to up front cost enable management  Toner generates profit  Designed for high reliability, long durability  Focus on preventing consumer from using 3rd  Total cost per page to be party toner minimized  Product is not designed for  Downtime=lost revenue long service life16 Confidential Material Xerox Image creative commons license, Flickr users © 2012 IBM Corporation
    17. 17. Where the rubber meets the road: Our view of HD Design: It’sdeeply integrated, multi-dimensional and closed loop Tightly • Think systems and solutions, not hardware and Integrated software separately • More and more variables to Multi- consider beyond system All DeliveredDimensional performance In HD Closed • Keep more and more responsibility for the Loop product than ever before17 Confidential Material © 2012 IBM Corporation
    18. 18. We’re partnered with Siemens because we share a vision of how thetechnology & process need to serve the business model The IBM-Siemens Alliance Delivers Unique Joint Value Siemens PLM Software Solution Offerings and Industry Expertise  Leading Siemens PLM solutions  Leading industry and domain practice expertise  Strong partnership that underpins our commitment to deliver solutions to our joint customers to deliver: IBM Process  Faster return on investment IBM Enterprise Consulting,  Accelerated Innovation Application and SI Industry & Industry  Effective enterprise integration Competency Insight (SWG & STG) (GBS) Team Center / IBM “Blue Stack” Enablement: DB2, Power7, Websphere, Rational …18 Confidential Material © 2012 IBM Corporation
    19. 19. We’re re-wiring our organization and our business process to makethe transition into the era of business model design People Organization Systems • Deep knowledge of • Change org bias • Full life-cycle view our client business towards global • Leverage global models integration talent pool • Created IBM • Created global CoCs • Leveraging big data Industry Academy for industry talent in end-to-end design • Increased focus on • Integrated hardware • Deploying global industry alignment & software into one design cloud group19 Confidential Material © 2012 IBM Corporation
    20. 20. IBM’s Quality Early Warning system links design, manufacturing andfield operations for early detection of problems Suppliers Factory Field Using advanced analytics, we can find problems significantly faster than with traditional Statistical Process Controls Design Procurement Service20 Confidential Material © 2012 IBM Corporation
    21. 21. IBM’s design cloud enables anytime anywhere design, securely Boeblingen Rochester Poughkeepsie La Gaude Yamato, Kyoto Yorktown Austin Haifa POWER7 Bangalore Note: site examples, not complete location listRealizing key business value propositions • IBM IT cost per developer reduced by ≈ 50% • Power 7 development cycle shortened by six months • Centralized servers achieved >90% utilization (18 months versus 24 months) 24x7 • Two programs staffed out of 1.75 teams21 Confidential Material © 2012 IBM Corporation
    22. 22. Change may be coming – but when? In some industries, talk about“Smarter Planet” and changing models seems pre-mature Case Example: Industrial Automation Company in 2011 Connectable vs. Data vs. Products vs. Connected Insight Solutions 5% 0% 30% 15% 30% 100 80% Other 40% Predictive Products Connectable % Services Connected Reactive Solutions Percentage of the installed Percentage of the installed base Revenue from bundled solutions based that can be connected to where analytics is applied to vs. discrete product, service the Internet and the proportion usage and performance data to sales. that actually is being connected. predict maintenance or other requirements. Source: Data based on interviews with client executives. Numbers under 5% mean “unknown and thought to be very small” rather than 0.22 Confidential Material © 2012 IBM Corporation
    23. 23. Pace of change is unpredictable and prone to sudden acceleration. Adoption of New Life Cycle & Events Can Technologies Is Installed Based Overtake Strategy Speeding Up Don’t Drive Value • Moore’s law has • Long life cycles & • Sudden events can been remarkably relationships are sweep aside entire constant profitable industry strategies • Pace of adoption of • New orders & • Aircraft leasing & new technologies is growth drive most of parts after 9/11 increasing. an enterprise value • Nuclear power after 3/1123 Confidential Material Black Swans Image creative commons license, Flickr users © 2012 IBM Corporation
    24. 24. Shift happens.Usually when you feel on top of the world. 1993 198324 Confidential Material © 2012 IBM Corporation
    25. 25. Thank You.Let’s Stay In Touch Email • Linked In • Profile : Reading List • Delicious : Twitter • @Pbrody • @IBM_Electronics25 Confidential Material © 2012 IBM Corporation