Strategic Investments Group
What is Transformational Change ?
The process of transformational growth during the 1990s shaped the boom and bust of the New
Economy, the new technologies drove productivity growth which created extraordinary business
There is a relationship between the development of information and communications
technologies, structural change and expansive economic growth when combined with finance
and macro policy, and, in particular, the government budget.
Strong Public Sector Strategy combined with structural
change and new business models will take us beyond
traditional GDP growth into market share expansion and
Bigger , Bolder Faster …..
Transformational Change …
• Kodak invents digital photography in 1975 but doesn’t
successfully capitalize on its invention.
• Xerox famously devises the mouse, the laser printer,
and the graphical user interface ( GUI ) but fails to
commercialize any of them.
• Digital Equipment Corp. spent $2 billion developing a
personal computer …. too little, too late.
• What makes opportunities like these so difficult to
grasp is that, so often, they require companies to move
far beyond their core into uncharted territory—into their
» Seizing the White Space, Mark Johnson
Evolution of Transformational Change
From 1771 —The Industrial Revolution
From 1829 — Age of steam and railways
From 1875 — Age of steel, electricity, and heavy engineering
From 1908 — Age of oil, the automobile, and mass production
From 1971 — Age of information and telecommunications
From 2003 — Age of cleantech and biotech
Are we ready for the next ?
There are vast changes yet to come that will change every aspect of business.
Developing the capacity to become Future Smart, to learn to anticipate future trends
and change may well become the key skill to survival
Technology will be the major enabling force for business in the future transforming
supply chains, value nets, business models, workstyles and opening up new global
markets for expansion
The wireless revolution is just beginning. The next generation of consumers, the kids
of today, will have less barriers to frustrate their adoption of technology. As
communications and commerce merge, as technology becomes pervasive and
invisible, tomorrow's consumers will forge new lifestyles.
Dr. James Canton; Institute for Global Futures
Make regional air travel competitive with bus service.
To deliver revolutionary low prices, Southwest needed to keep
margins low. To make money at these margins, it needed to
need to keep direct costs and overhead low and resource
velocity high, getting more turns from its capital equipment. To
lower costs Southwest chose to fly into secondary airports with
lower gate fees, negotiated revolutionary profit-sharing
contracts with its pilots’ union, entered into long-term contracts
to lower fuel costs, and eliminated expensive extras like inflight food and entertainment. To both lower costs and
increase resource velocity, it chose to use a single type of
plane, which both lowered repair and maintenance costs and
decreased turnaround times. And it adopted an automated,
direct sales model for tickets, which eliminated travel agent
fees and put payments in the company’s hands more quickly.
Whole Foods Market
• The Challenge:
• Create a national market for local organic produce and
• The Solution:
• Whole Foods inverted the established supermarket
model: Rather than keep costs low through centralized
distribution networks and profiting from selling high
volumes of low-margin goods, Whole Foods relies on
higher prices and margins on the perishables, which its
customers buy in large quantities. To sell customers on
the higher prices, it carefully coordinates its centralized
packaged-goods inventory with its local supply chains of
organic foods and homeopathic products and invests
heavily in making the grocery-shopping experience more
pleasurable and less tiresome.
Today’s fragmented approach on big deals does not
scale. Even before the deals we need to adopt a uniform
strategy around key country priorities a uniform pricing
strategy, a partner strategy and an execution strategy
Business Model Innovation
The process by which a company delivers radically
new value to existing or new customers by devising
dramatically new business models that deliver profits
in innovative new ways
The Canadian economy is predicted to increase by 2.6 percent in
2010 and 3.6 percent in 2011
Apple – Adjacency Innovation
Find an antidote to relentlessly declining market share and
break out of the role of a perpetual niche player in the
personal computer market.
Apple began by going down its well-trodden path of designdriven product innovation with the iMac and Apple’s first
laptop, the iBook. That was enough to stop the bleeding but
not ignite growth.
With the iPod, Apple ventured into music retailing, an entirely
new market for the company. By combining new technology
with a new business model – offering a convenient way to
upload digital music through the iTunes Web site – Apple
revolutionized the way people consume portable
entertainment and created an entirely new, highly lucrative,
Business Impact vs. Ease of Implementation
Filter Market Adjacencies
Easy to Implement
Difficult to Implement
• More than half of the twenty-six
companies founded since 1984 that
have entered the Fortune 500
between 1997 and 2007 did so
through business model innovation.
Risk Sharing Business Models
Cisco ―Skin in the Game‖ - ―Share my pain‖
Help lower OpEx
Help manage and optimize CapEx
Help match Expense to Revenue
Provide Solutions & address local SP requirements
Bandwidth and capacity management (video, OTT etc.)
Low Cost Service but still want SLAs
Risk Sharing / Mitigation, Profit Sharing, Revenue Sharing
Different commercial arrangements (not just discount %)
Next Generation Business Partner Models
Partnership Value Chain…
Operations Management Partnership
Network Transformation partnership
Network / Solution Integrator
Management of Complexity
Source: Cisco IBSG, 2008