2014 october ibm on digital transformation in white goods electronics public

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Digital Customer Experience
Digital Transformation in the Consumer Electronics Industry
A strategic Point of View
October 8th., 2014
© 2014 IBM Corporation
Thorsten Schroeer
Director Electronics Industry Europe
thorsten.schroeer@de.ibm.com

Digital Customer Experience This presentation covers 3 topics
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2
Digital by…
Industry Examples
3
Digital…
How to get Started
1
Digital
Transformation
What & Why

The Click to emergence edit of Big Master Data, title Social, style
Mobile and Cloud are fundamentally
changing how we live, work and interact – and the market place
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Ignoring the changing market can
Transforming the world’s biggest
appliance-maker into a nimble
internet-age firm – changing from
within.
even take down a dominant industry
player – the power is shifting to
consumers.
?

Consumers drive Digital Transformation in white goods … and so
Manufacturers have to handle retail consumer expectations
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Between 2008 and 2013 online shops of
manufacturers grew 4 times faster than
before and this trend will continue as
brands stand for trust, orientation and
security.
*Source: IFH Institut für Handelsforschung: „Die Zukunft hat begonnen – Handel 2020“, Internet World Business 15/14; ECC Köln
4
Understanding the wants and needs of the consumers during their consumer journey is essential
to be relevant for the consumer and to generate profitable growth

Digital Customer Experience Electronics Retailers are friends and enemies at the same time....what is
the future of the classical retail/wholesale value chain?
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85%of transactions trackable by retailer to an
individual name.

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Industry Example
Digital in
Multi Channel

The IBM IBV* found that the way a consumer behaves has to be
addressed
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IBV found five top omni-channel requirements
1 Price consistency across channels
2 In-store, locate out-of-stock item and get it shipped home
3 Track order status
4 Consistent assortment across channels
5 Return in store of online purchases
8
The consumer segments request omni-channel technologies
81% of todays‘ shoppers consist of trailblazers, transitioning tech-intrigued
shoppers; the traditional segment is expected to decline in the
future.
Each OEM has to build up their Actionable Consumer Insight to approach
their target groups, their consumer-Personas
*IBM IBV = IBM Institute for Business Value, business research organization from IBM

Google is the mainstream starting point. Low brand awareness (10%).
Open search by product category (90%).
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Refrigerator Washing machine
# Keywords Monthly Searches
90% 90%
#1 kühlschrank 568.991
#2 siemens kühlschrank 7.272
#3 bosch kühlschrank 5.267
#4 samsung kühlschrank 5.251
#1 waschmaschine 450.409
#2 miele waschmaschine 13.809
#3 aeg waschmaschine 4.043
#4 siemens waschmaschine 3.264
Google worldwide market share
Dishwasher Toaster Vacuum cleaner
90% 90% 90%
9
#5 lg kühlschrank 4.475
...
#8 bosch waschmaschine 2.868
#1 geschirrspüler 450.646
#2 siemens Geschirrspüler 6.103
#3 miele geschirrspüler 1.658
#4 aeg geschirrspüler 1.634
#5 bosch geschirrspüler 1.254
#6 bauknecht geschirrspüler 1.228
#1 toaster 496.173
#2 kitchen aid toaster 2.472
#3 siemens toaster 1.621
#5 serverin toaster 851
...
#7 bosch toaster 458
#1 staubsauger 559.826
#2 vorwerk staubsauger 33.152
#3 miele staubsauger 7.700
#4 dyson staubsauger 6.521
#5 aeg staubsauger 4.061
...
#11 siemens staubsauger 2.437

Analysis of 300.000 insights on a white goods OEM consumers to get
an impression of consumers wants and needs
General Exchange about Brands
and Products
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4%
Exchange about
Cooking, Baking, Washing
7%
Feedback on Brand and Product
Campaigns
3%
Exchange about discounts and
good deals
1%
Other Topics
7%
The conversation focuses on after-sales
topics (77%), which delivers the Input for
new consumers
Review and price comparison sites
dominate the share of voice in most
countries with 45% and are more trusted
than corporate communications
Detailed instructions on troubleshooting
and repair are provided by non-official
sources, yet highly visible
( 30.000 view per video)
Aftersales: Product Reviews and
Feedback
45%
After Sales: Repair and DIY
Aftersales: Product
Problems
12%
Instructions
10%
Presales: Request for
help during active
evaluation
11%
10
Source: IBM SMA / Analyzed time frame: 01/2013 - 05/2014, n=291.400 analyzed entries

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Industry Example
Digital in Manufacturing
Software Defined Supply Chain
© 2014 IBM Confidential IBM Internal Use Only IBM Corporation

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3 New Technologies
3D PRINTING INTELLIGENT ROBOTICS OPEN SOURCE

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STANDARDIZATION
3D PRINTING
NO ECONOMIES
OF SCALE
ON DEMAND
COST PER UNIT VOLUME PRINTED
$/CUBIC CM - BLENDED AVERAGE
-
MANUFACTURING
LOCATION
ELASTIC
79% -
92%

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MODULARIZATION
ROBOTICS
HARD
AUTOMATION
FLEXIBLE
TYPICAL COST PER ROBOTIC
ASSEMBLY STATION
ROBOTICS
INTELLIGENT
ROBOTICS
-
90%

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HARDWARE CONSTRAINED
BUILD A
MOLD OR
CAST
HARDWIRE
PRODUCTION
LINE
DEVELOP
EMBEDDED
CHIP
SOFTWARE DEFINED
PRINT PARTS
DIRECTLY BY
SOFTWARE
RECONFIGURE
ASSEMBLY THROUGH
SOFTWARE
DIGITAL CONTROLS
USING SOFTWARE

COST
4 DIFFERENT PRODUCTS • Click to edit Master text styles
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VOLUME
SIZE
COMPLEXITY
PERSONALIZATION
WASHING
MACHINE
INDUSTRIAL
DISPLAY
MOBILE
PHONE
HEARING
AID

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Click to LOWER edit Master COST title style
23%
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CHEAPER
AGGREGATE NORMALIZED UNIT COST
Source: Sourcemap, Econolyst, Mike Watson and Alex Scott, IBM Research, IBM Institute for Business Value

The Click to washing edit machine Master has title highly style
automated assembly with many
mechanical parts sourced and sub-contracted globally
The carbon footprint of the washing machine was calculated as 313 kg CO2e
(– manufacturing) and Second 39kg level
CO2e (shipping) for a total of 352 kg CO2e (delivered to US
consumer).
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© 2014 19 IBM Corporation

Click to Improvements edit in printer Master title technology style
and cost will enable a large amount of
3D Printing in the appliance industry in ten years
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Washing Machine Unit Manufacturing Cost Curve
$400
$350
$300
$250
$368 $368
$336
$243
T0 Traditional T0 Digital T1 Digital T2 Digital
$200
$150
$100
$50
$0
58% of the total product value of a washing machine will be 3D Printable in ten years
Assembly is a smaller fraction of total cost and already significantly automated
© 2014 20 IBM Corporation

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90%
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LESS VOLUME
REQUIRED
AGGREGATE NORMALIZED
MINIMUM ECONOMIC SCALE

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58%of the total product value
of a washing machine will be 3D Printable in ten
years – the service business impact will be
disruptive.
FULL REPORT MODEL NOW
AVAILABLE ONLINE AND ON YOUR
MOBILE DEVICE
22

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Industry Example
Digital in
Mobile

Why Click to Mobile? edit Mobile is Master at title the style
epicenter of the digital forces and a
catalyst for reinventing experiences and businesses
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The Next Generation of Enterprise Mobility: IBM strategic investment in IBM
Mobile First, IBM Interactive Experience and Security

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„there is one more thing“

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Apple and IBM combine their strengths to make enterprise mobility
more powerful, secure, and easy for any business.
IBM Confidential © 2014 IBM Internal Use Only IBM Corporation

Digital Customer Experience Industry Example
Digital by Analytics
“Analytics helps organizations make better decisions by getting
new insights from the volume and variety of big data “
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3x 5.4x
Top Performers are more likely to
use an analytic approach over
intuition within business processes
Organizations that lead in analytics
outperform those who are just
beginning to adopt analytics
Source: Analytics: The New Path to Value, a joint MIT Sloan Management Review and IBM Institute of Business Value study. Copyright © Massachusetts Institute of Technology 2010.

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Industry Example
Digital by
Analytics in
Manufacturing Supply Chain

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Analytics and Optimization provides value across the key supply chain processes.
Plan Source Make Deliver
Demand Forecasting
Multi-echelon Inventory
Optimization
2-5% manufacturing
costs saving
Return
10-30% inventory cost
reduction
Supply Chain Visibility
Procurement Spend Optimization
Reverse Logistics Optimization
25% procurement
spend
reduction
5-15% supply chain cost reduction
~30% channel inventory reduction
10-15% Improved warranty and repair order fulfillment,
reduced spares inventory, and warranty costs
Supply Chain Network
Optimization 5-15% supply chain costs saving

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IBM Manufacturing uses analytics tools across its operation
31

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Industry Example
Digital by Analytics
Sales Marketing
Customer Service
HR
RD
Finance
...

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Industry Example
Digital in
Software Service
Transformation

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Case Study IBM: Segment shift from hardware to services and
software builds foundation for IBM’s business success since late 1990s.
Source: IBM annual report 2013
34

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Case Study Philips: Software and Managed Services gain share and
margin
MRI hardware vs imaging software
Repeat sale in 7-10 years
Sell light bumps vs sell light
One time
product only
sell -
Repeat sale
1-2 times per year
competitive
Sell hours of light in a stadium
35

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Case study Google/Nest – Programmable thermostat
$249 $25
10x price differentiation driven by software on the device and in the cloud.
36

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From Product to Services/Software - final considerations
Talk to your end customers – they want to talk to you
Understand value of software/services and sell it
Own data and generate new value
Be bold
Be disruptive
As premium brand go first
37

Digital Customer Experience This presentation covers 3 topics
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2
Digital by…
Industry Examples
3
Digital
How to get Started
1
Digital
Transformation
What Why

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How to get Started
Digital in
Social / Multi Channel

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Creating a “system of engagement” that maximizes value creation at
every touch. Client Journey Map
Retailer
Service/
warranty
Call Center
Integration
of
Consumer
Data
Web
Social
Media
Direct Mail
Home
Connect
40

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How to get Started
Digital in
Mobile

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What‘s your best app?

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How to get Started
Analytics
Example Supply Chain

The Click to Supply edit Chain Master Analytics title journey style
can start with a Business Value
Accelerator followed by a recommended pilot strategy and deployment.
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Phase 2: Pilot
Phase 1: Assessment
Assess
Design and
Specify
Build and
Analyze
CCoonndduucctt
Recommend
Next Steps
Phase 2: Pilot
Focus
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Phase 3: Deploy
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Inventory Optimization
Demand Forecasting
Procurement Spend Optimization
Reverse Logistics Optimization
Supply Chain Visibility
Supply Chain Network Optimization

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How to get Started
Analytics
Sales Marketing
Customer Service
HR
RD
Finance
...

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Summary

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Digital Transformation – 5 Key take aways
1. Engage the end customer
2. Focus on smarter home user experience
3. Develop robust systems engineering (remote
diagnostics, updates and control of appliances through
“smart devices” in the cloud)
4. Ensure security to protect your brand
5. Select proven partners with IoT breadth and depth.

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The role of IBM in Digital Transformation
1. Strategic Advisor
2. From strategy to execution
3. Design – Build - Run
4. Cloud-Analytics–Mobile–Social – Security
5. Software
6. Global rollouts

Let‘s engage
thorsten.schroeer@de.ibm.com
www.linkedin.com/in/thorstenschroeer
www.xing.com/profile/Thorsten_Schroeer
IBM Electronics www.ibm.com/electronics

2014 october ibm on digital transformation in white goods electronics public

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