B2B Transformation in the Electronics Industry


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How are the same trends that affect the consumer electronics industry going to affect companies operating in the B2B space? This presentation from IBM's electronics global leadership forum takes you through case examples and recommendations.

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B2B Transformation in the Electronics Industry

  1. 1. Sustaining Competitiveness ThroughBusiness Model TransformationPaul BrodyGlobal Industry Leader, Electronics !
  2. 2. Consumers Lead Transformation, Enterprises LagEroding Obstacles to B2B TransformationPreparing for the Future © 2012 IBM Corporation
  3. 3. Enterprises used to know how to do disruption. Ad copy © Wang Laboratories. © 2012 IBM Corporation
  4. 4. Once upon a time, IBM disrupted Apple. © 2012 IBM Corporation
  5. 5. Lately, it’s consumers that have led the way, adopting mobile,social and cloud services at an enormous pace. CONTENT Seamlessly integrated across multiple devices APPLICATIONS CONNECTIVITY SERVICE © 2012 IBM Corporation
  6. 6. The global leadership positions in the electronics industrychanged dramatically in just 10 years (1 of 2) Enterprise Market Value – November 2001! (Market Capitalization, in Billions of U.S. dollars)!Long before people waited in line for iPads, they waited in line for the new PlayStation 2 Sources: Yahoo Finance, Bloomberg, and Thomson Reuters company financials and reports ! © 2012 IBM Corporation
  7. 7. The global leadership positions in the electronics industrychanged dramatically in just 10 years (2 of 2) Enterprise Market Value – November 2011! (Market Capitalization, in Billions of U.S. dollars)! We believe the same dramatic transformation is coming to B2B electronics markets Sources: Yahoo Finance, Bloomberg, and Thomson Reuters company financials and reports ! © 2012 IBM Corporation
  8. 8. Salesforce.com and Workday are great success stories, but themarket clearly doesnt believe Oracle and SAP are in danger160! Enterprise Market Value – October 2012!140! (Market Capitalization, in Billions of U.S. dollars)!120!100! 80! 60! 40! 20! 0! NetSuite! WorkDay! SFDC! SAP! Oracle! © 2012 IBM Corporation
  9. 9. In many ways, the B2B market bears out this sluggish rate of change. Case%Example:%Large%Energy%and%Industrial%Automa8on%Company Only half of the …none of the data …and technology is devices that can be streamed is used still sold as a product, connected are…. proactively… not a solution. 5%! 15%! 80%! Products! Services! Solutions!Percentage of the installed based Percentage of installed base in which Revenue from bundled solutionsthat can be connected to the analytics are applied to usage and versus discrete product, serviceInternet and the proportion that performance data to predict salesactually is being connected maintenance or other requirements Source: Data based on interviews with client executives. Numbers under 5 percent mean “unknown and thought to be very small” rather than 0. © 2012 IBM Corporation
  10. 10. Consumers Lead Transformation, Enterprises LagEroding Obstacles to B2B TransformationPreparing for the Future © 2012 IBM Corporation
  11. 11. There are three critical barriers to the same rapid transformation inthe enterprise Relationship based sales Large, installed product base Complex purchasing process & capital expense © 2012 IBM Corporation
  12. 12. Relationships are between people, not enterprises.And these days, the person is in charge. © 2012 IBM Corporation
  13. 13. Analytics and online marketplaces are making procurementrelationships ever more transparent •  Spend analytics provides new insights into how to reduce costs! Online •  Online marketplaces are marketplaces standardizing terms and making pricing transparent! •  Procurement systems make Spend Procurement rogue spending difficult! analytics systems •  B2B relationship selling is more difficult now! Diminished •  Business cases that depend B2B on capturing benefits are relationships easier to execute! •  Pricing and performance differences across solutions are more easily compared! © 2012 IBM Corporation
  14. 14. Incremental replacement of the installed base no longer drivesdemand and valuationBy 2025, China is likely to be the biggest market in the world for several key industries!Emerging markets buyers are focused on new growth, mature market buyers are morefocused on maintenance of existing systems Manufacturing Chemicals Petroleum Utilities Electronics © 2012 IBM Corporation
  15. 15. Economicsof lowvolumeproductionarechanging © 2012 IBM Corporation
  16. 16. The shift from products to services is radically simplifying thebuying decision and creating compelling ROISource: Photizo Group, MPS Advisory Service, MarketWatch™! © 2012 IBM Corporation
  17. 17. What happens when you combine these trends?Enterprise Transformation at Consumer Speeds. © 2012 IBM Corporation Containers falling off the Rena, URL: http://www.nzhistory.net.nz/media/photo/containers-falling-rena, (Ministry for Culture and Heritage), updated 30-Aug-2012
  18. 18. Case Example: the entire market for printing servicestransformed itself in 3 years between 2008 and 2011 Huge Growth for Managed Print Services, 
 Represented by the Number of MPS Programs Announced! 75%! •  Virtuous Cycle: Inflection point to = Number of new MPS programs! rapid change: at 15 percent of the = MPS program growth! 58%! market, a sudden takeoff in the 56%! proportion of spending is shifting 2! 11! to managed print services 45%! 50%! •  Huge Value Proposition: 31! Compelling 30+ percent cost reductions for customers, higher margins for winning vendors •  Service Extension: Branching 25%! beyond copying into printers, processes, and other IT 14%! infrastructure services 10! 3%! 4%! •  Winner Takes All: Transformation 1%! 2%! 1! 1! driving consolidation toward 0%! 1! 1! larger vendors 2004! 2005! 2006! 2007! 2008! 2009! 2010! 2011! Source: Photizo Group, MPS Advisory Service, MarketWatch™! © 2012 IBM Corporation
  19. 19. The transition looks very similar to the that overtook the mobilephone industry in it’s own transition to smart devicesIn the consumer space, winners dominate profits. Will it be the same in the enterprise? Profit shares of eight mobile phone companies 100%! HTC! SE! 75%! Apple! 50%! LG! 25%! RIM! Sam! © Asymco! Nokia! 0%! Q2/2007! Q4/2007! Q2/2008! Q4/2008! Q2/2009! Q4/2009! Q2/2010! Q4/2010! Q2/2011! Q4/2011! © 2012 IBM Corporation
  20. 20. Across B2B segments that have been transformed, the winner-take-all model appears to be quite powerful 99% Share of mobile device industry profits going to Apple and Samsung in 2011 Web-site hosting share of the top three cloud 96% infrastructure providers in 2011: Amazon, Rackspace, and Linode While not always as stark as in B2C, the winner-take-all nature Infrastructure share of top three mobile 74% systems vendors in 2010: Huawei, Ericsson and NSN of products-to-services transformations leaves the market transformed in relatively short order! Proportion of the managed print services 52% business contracts taken by Xerox, HP, and Ricoh, the top three in 2010 Source: Asymco, Gartner, MobileNews, DailyWireless, Jack of All Clouds, and IBM Research! Source: Photizo Group, 2011 MarketMetrics™! © 2012 IBM Corporation
  21. 21. A shake-out in printing has been taking place for more than a decade © 2012 IBM Corporation
  22. 22. Amidst all that destruction, a whole new ecosystem has risen upto service the printing and imaging industry:Ecosystem Growth and Technology Adoption, 2006, 2009, and 2012! ProfessionalNumber & Type of Enterprises Serving the Printing Ecosystem Market services! Resellers! Infrastructure providers! OEMs! Software! 2006 2009 2012 Source: Photizo Group, MPS Advisory Service, MarketWatch™! © 2012 IBM Corporation
  23. 23. Consumers Lead Transformation, Enterprises LagEroding Obstacles to B2B TransformationPreparing for the Future © 2012 IBM Corporation
  24. 24. Key Conclusions: Electronics markets that are undergoing B2Btransformation exhibit three key characteristics •  20-40 percent annual savings and Transformation is elimination of CapEx have had biggest business-case driven impact! •  Analytics, platforms, and new services come after transformation! •  Change can happen in between 0.5 and 1.0 Once started, product life cycles! 2! transformation is swift •  •  Three years in managed print services! Five years in network equipment! Connected-device •  Transformed markets show rapid consolidation of industry players! 3! markets are “winner-take-all” •  Profitability consolidation even stronger than market share! © 2012 IBM Corporation
  25. 25. Disruptive competitors have a history of re-framing the product andobjective, using technology to think outside-in Amazon Cloud! •  Competition thought of Amazon as a retailer that was out of its depth! •  Amazon sees itself as a technology company! Square! •  Competition thought it was selling transactions processing! •  Square is selling customer intimacy and analytics! Free.fr! •  Competition thought it was selling cable TV! •  Free is building a national fixed and mobile network! Data Center image, Flickr Creative Commons! © 2012 IBM Corporation
  26. 26. For companies in B2B, the single strongest protection fromdisruption is customer intimacy. How well do you know them?The same piece …can be viewed from …with differentof equipment… multiple value propositions: transformation options: A commodity that’s costly Reduce cost of ownership, to own and operate. eliminate capital expense A key differentiator in the Guarantee capacity, build overall solution deep design partnership A failure-prone “weak link” Sell uptime and results that causes down time instead of the device One part of a larger set of Expand to other markets to business issues sell total solutionCNC image, Flickr Creative Commons! © 2012 IBM Corporation
  27. 27. When market transformation accelerates, organizations should drivetransformation outside in, starting with client-facing workIn B2B, leaders have often started with theclient-focused value proposition and thenaligned their organizations to support it •  Started with the cost-per-page value proposition! •  Still completing the transformation toSales a solutions and services organizationServiceSCM •  Created the Integrated SystemsR&D Solution Company in 1991, the predecessor to Global Services! •  ISSC became the world’s second- largest IT services firm in it’s first four years of operations! •  Alignment and integration ofFinance Global Services followed! © 2012 IBM Corporation
  28. 28. We cannot predict the future… we can only prepare for it. Product-to-service transformation has been slower in B2B electronics than in consumer The traditional impediments to this transformation are now eroding quickly When transition does happen, it’s driven by a compelling business case, not just technology Products-to-services transitions, when they happen, are swift and “winner-take-all” © 2012 IBM Corporation
  29. 29. Before the PC, before disruptions and the Internet andeverything, the IBM brand stood for one thing above all else © 2012 IBM Corporation
  30. 30. Email •  pbrody@us.ibm.comLinked!In •  Profile!:!hJp://www.linkedin.com/in/pbrody!Reading!List •  On!Delicious!:!hJp://www.delicious.com/prbrody! •  On!TwiJer:!#WorthReadingTwiJer!&!ADN •  @pbrody!Sina!Weibo •  @pbrody! !