Smarter electronicsPoint of viewThe evolving electronicsindustryCourting the customer through insight and innovationTransistor by transistor, the electronics industry is literally changing theworld. Consider this: today’s fastest computer can now achieve 17 quadril-lion calculations per second1, and by 2015 there will be more than sevenbillion mobile devices in the world consuming and generating massiveamounts of data.2Right now there are more than one billion transistorsfor each person on the planet.3With innovations like these, it is no surprise that the electronics industrycontinues to be a leader in research and development investment acrossthe world.4However, despite an impressive track record of pioneeringtechnology, today’s electronics industry is in a state of disruption. Productlife-cycles are compressing, emphasizing the need to create innovativeproducts and services faster and more cheaply than ever before.Competitive pressures are at an all-time high, with aggressive newentrants vying with a continuing need to contain operational costs.And though profit margins for some electronics segments remainrelatively high, most are under heavy margin pressure.Together, these trends are driving electronics companies to find newgrowth opportunities. Many believe that the best way to do this—perhapsthe only way to do it—is to transform their business models by gettingcloser to their customers. In fact, the 2012 IBM CEO study revealedthat 86 percent of global electronics CEOs are implementing extensivechanges in their organizations to deepen their understanding of individualcustomer needs, while enabling faster, more relevant responses to marketsand individuals.5CEOs realize that innovative products and services areonly successful when they deliver on customer needs.
2Point of viewSmarter electronicsAt IBM, we believe the best route to this customer intimacy isthrough the data that electronics devices and equipment create.With billions of people connected by nearly a trillion devices,this data represents a wealth of untapped resources thatelectronics companies are just starting to understand. It is notjust the volume of data that is exploding, but also the variety,velocity and veracity—the percentage of the data that needsto be reviewed and addressed—that is growing exponentially.However, as revealed in the IBM 2011 CMO study, a vastmajority of electronics companies are unprepared to managethe impact of all this data and make use of social media asa strategic business tool.6Now is the time for electronicscompanies to convert data into insights, and create the newproducts and services that will continue to change the world.Courting the customerIn the 21st century, innovation for its own sake is not enough.The key to success is not just bringing new products to themarket, but enhancing business-to-business interactions andpeople’s lives. Greater customer intimacy means a shift in thetraditional relationships between buyers and sellers. It becomesone of partnership—a mutually beneficial feedback loop inwhich customers are active participants in the business, andcompanies use customer insight to innovate.Insight resulting from analysis of data can be used to redefineproduct development and customer experiences. Investing inan array of capabilities that create deeper insights and promotesmarter products and services can pay off in terms of fasterand higher returns. Most electronics companies have alreadyinvested in some form of customer information and productlifecycle management, and while investing in these individualcapabilities can produce good returns, an end-to-end approachoffers systemic benefits that can yield exponential returns. Forexample, the value of customer data can be greatly enhancedthrough investments in analytics that drive deeper insights.Tying these insights to product development can shorten timeto market and produce offerings that are more aligned withcustomer needs. To this end, a four-phase roadmap, witheach phase building on the one before, can help improve anelectronics company’s cumulative cash flow and innovationcapabilities. At IBM we call this the C.O.R.E model:7●● Capture the data: Collect, integrate and standardize data tomake it more useful.●● Optimize insights: Apply analytics to the data to yield deepcustomer and operational insights.●● Revamp development: Increase credibility in the marketplacethrough the introduction of more intuitive and relevantproducts and services.●● Enhance the experience: Extend the value of productsthrough value-added services.Capture the dataThe first step is focused on gathering as much useful andrelevant information as possible, whether from product usage,mining social media or tracking customer interactions withservice personnel. All relevant sources of data should be tapped.As consumers connect more and more of their devices, fromthe living room to the kitchen, data can be collected, withpermission, at a level of detail never before possible.Optimize insightsIn the second step, companies analyze the data they capturedto spot hidden trends, predict outcomes and lend certainty todecision-making. It is a critical capability, because it creates abasis for action—something that raw data alone cannot provide.Analytics can help reveal the most intelligent and profitablecourse of action, based on answers hidden within the data.As an example, a leading telecommunications company moni-tored social media, call records and other subscriber data in realtime. They then analyzed the data to predict churn and moveproactively to increase customer retention, resulting in a quick10 percent return on investment.8
3Point of viewSmarter electronicsRevamp developmentInsights from analyzing data must be used to transform howproducts and services are created and managed. The abilityto achieve rapid time to market with intuitive and—moreimportantly—relevant offerings is a major factor in marketcredibility. The integration of social networking, open sourcehardware and software, 3-D printing and crowd-sourceddevelopment funding are transforming every element of theproduct development process. The result is the emergence of awhole new collaborative, global and transparent developmentprocess for electronics companies.Enhance the experienceToday’s consumers respond to direct, continuous and high-touch connections to trusted brands. Offering real-time,pervasive service execution, as well as device and subscribermanagement, is critical for creating brand preference andcustomer loyalty. Adding new services does more than boostproduct sales, it also provides opportunities to interact, partnerand gather information to enhance experiences. Electronicscompanies such as Ericsson, in network management, andRicoh, in document management, are shifting their businessmodels from products to services. Ericsson now offers managedservices that help companies design, build and manage entirenetwork infrastructures. Once mainly known as a copier andprinter manufacturer, Ricoh now offers professional services tohelp companies manage document-intensive business processes.ConclusionThe idea of creating experiences that matter to the customerlies at the heart of competitiveness in today’s electronics indus-try. It is actually not a new concept. Decades ago, companieslike Kodak and Polaroid understood they were really in thebusiness of creating memories, not just selling cameras andfilm. However, with the technology available to them at thetime, they were unable to truly deliver on the promise of differ-entiated experiences. Today, the focus on customer experiencehas grown to the point where it practically overshadows theproducts themselves. That context is essential when consideringnew ways to innovate and generate revenue. In today’s age ofdata explosion and information overload, the key technologyneeded is to process and understand all types of data. It isapplying analytics to data that allows companies to gain newinsights that drive innovation. As stated by IBM Chairman,President and Chief Executive Officer Ginni Rometty in herMarch 7, 2013 speech to the Council on Foreign Relations,“Data is indeed the basis of competition in the ‘smarter’ era.And big data is indeed the next natural resource—promisingto do for our era what steam, electricity and oil did for theIndustrial Age.”Ultimately the electronics industry will need leaders thataccept the challenge to transform their companies and theindustry at large. As an electronics company, IBM has notonly helped support such a transformation for other companies,but has undergone the same transformation itself. Years ago,IBM remixed its portfolio toward services and software, invest-ing in solutions that foster communications with clients. Theseshifts not only saved IBM from the grip of commoditization,they also positioned the company for the services economy ofthe 21st century. That same transformation is what is requiredfor other electronics companies today.
For more informationFor more on how to build a smarter electronics industry,please visit: ibm.com/electronicsAdditionally, IBM Global Financing can help you acquire theIT solutions that your business needs in the most cost-effectiveand strategic way possible. We’ll partner with credit-qualifiedclients to customize an IT financing solution to suit yourbusiness goals, enable effective cash management, and improveyour total cost of ownership. IBM Global Financing is yoursmartest choice to fund critical IT investments and propelyour business forward. For more information, visit:ibm.com/financing Please RecycleELE03005-USEN-02