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GE Case Study

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Applying Next Quarter Analytical Tools To Globally Diverse Company, yields huge savings potential.

Applying Next Quarter Analytical Tools To Globally Diverse Company, yields huge savings potential.


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  • 1. GE & NQ Strategic Partnership Drives Best in Class Performance Yielding $18M to $2B Cost Savings Prepared for by Charles Caldwell Thomas Boyle NextQuarter LLC The information contained in this document is privileged, confidential and protected from disclosure. If you are not the intended recipient, any dissemination, distribution or copying is strictly prohibited. If you think that you have received this document in error, please notify the sender and delete. Copyright 2009 © NextQuarter LLC. All rights reserved.
  • 2. Agenda 1) Define Business Problem to Solve 2) Opportunity - New Source of Profits 3) Value Creation = Incremental Improvements 4) Model Knowledge Worker Productivity 5) Identify Weaknesses / Source of Risk 6) Finding Value in Detailed Business Model 7) Quantify Hidden Costs (information-based) 8) Visualize / Prioritize - Greatest Potential Gain 9) Audit/Plan - Strategy, Roadmap & Execution Copyright 2009 © NextQuarter LLC. All rights reserved. Page 2
  • 3. What To Do When Profits Get Squeezed . . . Revenue Profits Expenditures Solution: Increase Knowledge Worker Effectiveness - Reduce Business Practice Cycle Times - Automate, Normalize & Design for Reuse/Renewal - Leverage Strategic “Pay-As-You-Go” Capabilities - Prioritize Effort - Realize Greatest Gains (ROI) Source of New Profits = Simplification, Optimization & Focus on Results Copyright 2009 © NextQuarter LLC. All rights reserved. Page 2
  • 4. Opportunity - Increase Industrial KW Effectiveness 15% Business Model Analytics Industrial (M) Industrial Annual Report Data $18M Revenue (000,000) $17,725 Revenue (%) 0.1059 NBCU Operating Expenses (000,000) $15,982 $16M Infrastructure Operating Expenses (%) 0.1155 Net Income (000,000) $1,743 $50M Net Income (%) 0.0600 Commercial NQ Analytics Healthcare Finance $42M Salaries & Wages (000,000) $4,381 $69M Employees 70,000 Producers 1,966 $101M Users 7,124 Consumers 60,909 Knowledge Workers 9,091 GE Money KW Labor Cost $293 Potential Cost Savings $121 Estimated GE Potential Productivity Gains Estimated Gain (15% of Potential) $18 Value Creation (% Net Income) 1% Optimizing Knowledge Worker Effectiveness 15% Yields $18M in New Profits Copyright 2009 © NextQuarter LLC. All rights reserved. Page 4
  • 5. Quick Hits Yield Huge Incremental Improvements . . . Infrastructure How do you increase profits when: Producers = 3.1% 3,306 KW = 23.5% Users = 20.4% 1,651 » Ability to increase revenues is decreasing Consumers = 76.5% 81,042 » Rising costs are breaking budgets Commercial Finance Producers = 4.4% 1,085 » Effort to create value keeps declining KW = 80.3% Users = 75.9% 18,985 Consumers = 19.7% 4,930 Challenge: GE Money Producers = 3.6% 2,527 » Thinking differently about problem KW = 69.3% Users = 65.7% 45,950 Consumers = 30.7% 21,523 » Expand insight to change perspective Healthcare » Empowering KW with the new capabilities Producers = 17.4% 8,161 KW = 64.0% Users = 46.6% 21,892 Consumers = 36.0% 6,947 Solution: NBC Universal Producers = 18.9% 2,935 Assess Information-based Costs KW = 48.2% Users = 29.3% 4,543 Consumers = 51.8% 8,023 Use KW Metrics to Guide Transformation Focus on Enhancing KW Effectiveness Industrial Producers = 2.8% 1,966 KW = 13.0% Users = 10.2% 7,124 Consumers = 87.0% 60,909 IT Dependency is Impacted by # KW Competitive Advantage - “Leap Frog” Competition in Tough Environment New Tools for Increased KW Productivity in Up/Down Economy Just Cutting Knowledge Worker Jobs Does Not Increase KW Effectiveness Copyright 2009 © NextQuarter LLC. All rights reserved. Page 5
  • 6. Focus on Modeling Knowledge Worker Productivity Producer Individual, workgroup, or organization that earns more than 50% of their income producing content/digital media assets such as text, images/graphics, audio, or streaming media/video. User Individual, workgroup, or organization that earns less than 50% of their income producing content/digital media, but uses media to drive sales, markets, business and/or process improvements, and/or value enhancements for customers and shareholders. Consumer Individual, workgroup, or organization that earns nothing from their use or production of media but uses media to influence buying and selling, and/or sources of supply to fulfill self-service satisfactions. Source of New Profits = Making Knowledge Workers More Effective Copyright 2009 © NextQuarter LLC. All rights reserved. Page 6
  • 7. General Electric Corporation Commercial Business Model Analytics Infrastructure GE Money Healthcare NBC Universal Industrial Total Finance Annual Report Data Revenue (000,000) $57,925 $34,288 $16,997 $25,019 $15,416 $17,725 $167,370 Revenue (%) 0.3461 0.2049 0.1016 0.1495 0.0921 0.1059 0.8020 Goods $20,997 $12,429 $6,161 $9,069 $5,588 $6,425 $60,670 Services $37,741 $22,340 $11,074 $16,301 $10,044 $11,549 $109,049 Operating Expenses (000,000) $47,115 $28,249 $20,739 $13,941 $12,309 $15,982 $138,335 Operating Expenses (%) 0.3406 0.2042 0.1499 0.1008 0.0890 0.1155 0.7955 Net Income (000,000) $10,810 $6,039 $3,056 $4,280 $3,107 $1,743 $29,035 Net Income (%) 0.3723 0.2080 0.1053 0.1474 0.1070 0.0600 0.8330 NQ Analytics Salaries & Wages (000,000) $9,429 $5,927 $14,530 $10,032 $2,538 $4,381 $46,837 Salaries & Wages (% Op. Exp.) 0.2001 0.2098 0.7006 0.7196 0.2062 0.2741 0.3386 Employees 106,000 25,000 70,000 47,000 15,500 70,000 333,500 Producers 3,306 1,085 2,527 8,161 2,935 1,966 19,980 Users 21,651 18,985 45,950 21,892 4,543 7,124 120,145 Consumers 81,042 4,930 21,523 16,947 8,023 60,909 193,375 Knowledge Workers 24,958 20,070 48,477 30,053 7,477 9,091 140,125 KW Labor Cost $735 $622 $1,491 $1,005 $241 $263 $4,357 Potential Cost Savings $336 $282 $1,491 $461 $110 $121 $1,984 Estimated Gain (15% of Potential) $50 $42 $101 $69 $16 $18 $298 Value Creation (% Net Income) 0% 1% 3% 2% 1% 1% 1%
  • 8. Where Are Information-based Expenditures Highest? 30% Custom Development Focus on Area 25% of Greatest Complexity 20% Publishing & Printing 15% Legal & Design & Engineering Accounting 10% Broadcast Information & Telecom Services & Data Advertising Processing & Marketing Hardware Software Human Logistics 5% Resources Services Consulting & Services 0% hidden_sum.1.0.ai Advertising & Broadcast Applications Design & Desktop Actuarial Business-to- Legal Courier Administrative Newspaper Applications Public Relations Graphics Services Business Services Services General & Magazine Wired Carriers Enterprise Specialty Services Development Audio & Video Systems Technical Servers Executive News Accounting Freight & Periodical, Tools Production Satellite Services Placement Syndicates Services Postal Environmental Book & Facilities Telephone Services Consulting Other Systems & Entertainment Cellular & Services Testing Labs & PBX Libraries Transportation Management & Recreation Help Supply & Archives Services Consulting Catalogs Monitoring Translation & Storage Services Services eCommerce Market & Analysis Interpretation Online Business & Networking Research Personnel Information Scientific & Forms & Analysis Billing & Instruments Management Services Technical Database Reporting & Products Consulting Software Payroll Transaction Physical & Services Processing Process & Implementation Engineering Logistics & Customization R&D Data Consulting Capture Upgrades & Life Sciences & Imaging Maintenance Manintenance R&D & Repair Data Entry Software User Social Support & Training Sciences Other Services Training R&D Copyright 2009 © NextQuarter LLC. All rights reserved. Page 8
  • 9. How Will NQ Improve GE Knowledge Worker Effectiveness? The World is Shifting 1995 - 2004 2005 - 2010 2011 - 2020 (legacy) (shift) (SaaS) Scale Creates Disadvantages Records Messaging » Impedes Responsiveness Cisco Apple Life Cycles SPAM AT&T Viruses Theft HP Localization CA IBM Planning Marketing Pricing » Increases Info-based Costs SAP SAS Vendavo Collateral Versioning eMail Archiving Dell Vignette Search ERP Costing Policies XBRL EMC » Projects are Much Larger Oracle ADP Lifecycle Management Advertising Presentations Teradata Content Business Management Symantec Billing Intelligence Business » Difficult to Change Course Sun Microsystems Processes Interwoven Digital Rights Storage Lawsuits Microsoft BEA DAM Supply TIBCO Business Discovery Chain Sybase Management NQ is Managing Shift Transformation Controls tra nsh ift1 .ai Quantify information-based costs buried in overhead Assess knowledge worker activities by specialist Use activity-based metrics to prioritize/assess gains Potential Absolute Actual Cost Costs Cost Leverage SaaS (pay-as-you-go) to meet needs Savings Savings Normalize business metrics connect-the-dots (XBRL) Strategic Partnership Focuses on Generating Incremental Results 60 days > Plan . . . 90 days > Contracts . . . 120 days > $1M . . . 150 days > $3M . . . Copyright 2009 © NextQuarter LLC. All rights reserved. Page 9
  • 10. Where Should GE - Industrial Focus Transformation Effort? Potential Cost Savings Assume Making 15% (minimum) GE - Industrial Estimated First Year Gains Support Administration 24 13 37 & Training $1.0M Research Administrative Authoring 26 39 65 & Learning $3.6M $2.4M Communications 13 27 40 Creative Development 3 10 13 File Management 12 10 22 Meetings $3.0M Meetings 20 18 38 Authoring $3.9M Research & Learning 16 19 35 Support & Training 7 5 12 File ge_indust1.ai Management Communications 0 $10 $20 $30 $40 $50 $60 $70 $80 Million $1.8M $1.9M Creative Potential Optimized Practice Potential Cost Savings Development (total cost $121M) (total savings $141M) $0.4M Focus on Quick Hits that Yield the Greatest Potential Gains = $18 M NextQuarter delivers insight, know-how, tools and talent to solve big problems! Copyright 2009 © NextQuarter LLC. All rights reserved. Page 10
  • 11. What Differentiates NQ Efforts - Quantifiable Results! NQ Sustainability Practice Reward collective achievement as individuals engage and become empowered to do 5 Validate their work more effectively. + Report 4 Strategy + Benchmark Quarterly to Validate Cost/Performance Roadmap - Use Analytics developed to 3 Compare measure Hidden Costs - Utilize findings to manage Enhance Governance & + Analyze relationships with: 2 Hidden Compliance Strategy and - Solution Providers Deployment Roadmap: - Auditors/SOX Teams 1 Business Costs Compare Cost/Performance - Use Comparative Analysis to - Outside Legal Counsel Model Identify your Hidden Costs to others with/in similar: - Industries assess strength/weaknesses - Identify areas to improve - Systems Integrators - Service Providers: and Capabilities to leverage - Insurance/Banks associated with: - Markets - Calculate potential ROI based - Leverage findings to improve Model Business Structure - Advertising, Marketing & PR - Products reporting: - Services on achieving: & Relationships: - Broadcast & Telcom - Cost Reductions - Investor Relations - Headquarters - Custom Development - Revenue - Productivity Gains - 8K, 10K + Proxy - Leadership & Culture - Design & Engineering - Employees - New Revenue - Use findings to enhance - Policies, Controls & Procedures - Hardware - Capabilities - Value Enhancements core competencies and - Demographics/Geography - Human Resources - Locations - Use ROI to set Strategy automate controls and - Countries & Localization - Information & Data Processing - Countries - Update Roadmap based on best practices (workflow) - Strategy & Resources - Legal & Accounting - Partners - Suppliers achieving cost/performance - Stakeholder Interests/Needs - Logistics five_step.ai Copyright © 2009 NextQuarter LLC. - Customer Requirements - Specialty Services - Customers - Product & Services - Publishing & Printing - Value Chain/Segmentation - Software - Cost & Productivity - Assets & Archives - Systems & Applications - Effectiveness & Reporting NQ Leverages Proprietary Econometric Data Models, Tools & Analytics Copyright 2009 © NextQuarter LLC. All rights reserved. Page 11
  • 12. NextQuarter Guarantees 400% Returns on Efforts! Program: Benchmark Performance: Productivity – Establish Current Knowledge Worker Effectiveness Capabilities – Leverage Imagination Breakthrough Technologies Projects – Improve Investment/Asset Returns (ROI/ROA) Report Performance: Situation – Validate Real-Time Current States & Conditions Initiatives – Drive Improved Stakeholder Value Creation Outlook – Achieve Best in Class Performance & Cost Savings Engage NextQuarter & Start Generating New Source of Profits! Sign Mutual Confidentiality Agreement Approve Engagement Agreement - Scope of Work, Schedule & Cost Begin Benchmarking w/ GE Proprietary Analytics Review / Prioritize Quick Hits - NQ Stewards & Validates Results NextQuarter LLC - P.O. Box 1009 Portsmouth, NH 03802 603-294-4171 www.nextquarter.com Copyright 2009 © NextQuarter LLC. All rights reserved. Page 12