Leading through Connections

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IBM Global CEO Study 2012

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  • This is IBM’s fifth biennial Global CEO Study. From this research, we now have data from more than 5,000 CEO interviews stretching back to 2004, which has enabled extensive longitudinal analysis to shed light on how perspectives are changing – or not – over time. How are CEOs responding to the complexity of increasingly interconnected organizations, markets, societies and governments – what we call the connected economy? To find out, we spoke with more than 1,700 CEOs, general managers and senior public sector leaders from around the globe. Our key findings: CEOs have a new strategy in the unending war for talent Obsessed with understanding customers as individuals, CEOs are building analytical muscle to engage them with relevance and immediacy Extensive partnering is providing the edge CEOs need to take on radical innovation
  • Six years. That is the average time-in-role of the CEOs and public sector leaders we interviewed for this Global CEO Study. During that time, these leaders have experienced the full spectrum of economic volatility – booms, dips and financial disintegration. This study is based on face-to-face conversations with chief executive officers in 64 countries and across 18 industries. Sixty-eight percent are located in mature markets; the remaining 32 percent are in growth markets. To smooth any geographic distortion, CEO responses were weighted based on actual regional gross domestic product (GDP) for 2010.   Aerospace & Defense (1%), Automotive (4%), Banking (9%), Chemicals & Petroleum (4%), Computer Services (3%), Consumer Products (6%), Education & Research (3%), Electronics (6%), Energy & Utilities (3%), Financial Markets (3%), Government (9%), Healthcare (4%), Industrial Products (10%), Insurance (10%), Life sciences / pharmaceuticals (3%), Media & Entertainment (5%), Professional Services (3%), Retail (6%), Telecommunications (4%), Travel & Transportation (5%)
  • As part of our analysis, we sought to understand differences between responses of CEOs in financially outperforming organizations and those in underperforming organizations. This categorization was based on CEOs’ assessment of their own organizations. We asked CEOs to rate their organization’s three-year revenue growth and profitability as compared to their industry peers. Organizations that excelled against both financial measures were classified as outperformers; those with low rankings in both areas were classified as underperformers; and all others were considered peer performers. We referenced the CEO self-assessed position to quantitative data for the 2011 CIO and CMO Studies and assessed correlation between indicated performance and actual performance - and obtained 80%+ correlations. This method of self-assessment was selected as the best option because external data is generally only available for less than 50% of organizations due to some being private, some being public, and some being regional CEOs. Using this approach we have more than 99% data coverage, enabling us to do extensive performance analysis.   The average time-in-role or tenure of CEOs is 6 years. The CEOs we interviewed are very experienced and all say basically the same thing: they know how to be CEOs and know what to say as a CEO. The difference lies in what they do.   As an example: in one of our questions we asked to state the organization’s revenue from new sources past and future. There was a significant difference between outperformers and underperformers on the revenue they stated coming from new sources over the last 5 years. But there was no difference in future expectations on revenue from new sources.
  • Drawing on more than 1,700 CEO conversations and our own management consulting experience, we believe three imperatives are essential for outperformance: Empowering employees through values Engaging customers as individuals Amplifying innovation with partnerships
  • Technology is now driving more organizational change than any other force – even the economy. How are CEOs harnessing this unrealized potential?
  • Since our CEO Study series began, technology – in its widest sense – has progressively risen on CEOs’ radar. It now ranks as the number-one factor impacting organizations. Some CEOs spoke of how advances in alternative energy, biotechnology, nanotechnology and other fields far beyond IT are revolutionizing products, operations and business models. Others described new possibilities created by a physical world outfitted with millions of networked sensors. CEOs also discussed the whirlwind of “social” change they’re witnessing. Facebook, Renren, Twitter, Weibo, Foursquare and other technology upstarts have stormed across markets and industries.3 Smart, mobile devices are increasingly pervasive. And new technologies are emerging to help organizations store and make sense of the “big data” this digital storm is creating.   Other percentages: Macro-economic factors: 62%, Regulatory concerns 58%, Globalization 43%, Socio-economic factors 37%, Environmental issues 30%, Geopolitical issues 23%
  • More than half of all CEOs see human capital, customer relationships and innovation as key sources of sustained economic value. Definition of human capital: people in the organization and their knowledge, skills, abilities and capacity to develop and innovate. As we looked across the whole of CEOs’ responses, one consistent theme emerged: an overwhelming focus on changes in how people engage with the organization and with each other. The view that technology is primarily a driver of efficiency is outdated; CEOs now see technology as an enabler of collaboration and relationships – those essential connections that fuel creativity and innovation. Each of CEOs’ key sources of sustained economic value – human capital, customer relationships and innovation – is being fundamentally affected. Technology is creating entirely new ways of connecting innovators inside and outside organizations, altering organizational composition, structure and span of control.
  • We see that outperformers are even more focused on combining technology with the business to drive innovation and growth.
  • Whether struggling for share in mature markets or grabbing territory in growth markets, CEOs must differentiate their organizations. And our study findings suggest they intend to do so through new and deeper connections. To drive outperformance, CEOs are: Empowering employees through values Engaging customers as individuals Amplifying innovation with partnerships
  • CEOs see greater organizational openness ahead. But as rules are refined and collaboration explodes, how will they avoid chaos, protect the business and deliver results? Control has delivered benefits over the years: it helps enforce regulatory compliance, drive standardization and avoid waste. However, the movement toward greater openness is inevitable and offers tremendous upside potential – empowered employees, free-flowing ideas, more creativity and innovation, happier customers, better results. But openness also comes with more risk. As rigid controls loosen, organizations need a strong sense of purpose and shared beliefs to guide decision making. Teams will need processes and tools that inspire collaboration on a massive scale. Perhaps most important, organizations must help employees develop traits to excel in this type of environment.   Examples   Organizational openness introduces new opportunities to create value through collaboration Pepsi Introduced social media including comment spaces, blogs and an idea network - Integrated enhanced podcasts with two-way interactions - Pursued community out-reach   To re-balance control with openness, CEOs are focused on values, collaboration and mission Siemens Built and aligned common values to promote performance with integrity - Created ambassadors among employees - Articulated core beliefs and expected behaviors - Enabled employee dialog across intranet - Promoted social polling and twitter-like platform
  • CEOs believe their organizations will be impacted more by the pressure to be open than the need to control. Tight control gives way to more openness. They anticipate demands for even more transparency, and the competitive need to open up their organization to collaborate more internally and externally.   The question we asked was whether the influence of openness was impacting the CEO’s organization more, OR if the influence of operational control was of greater impact. CEOs from outperforming organizations had a clearer sense than those of underperforming organizations about the influences impacting their organization; they had a more binary perspective. There were fewer outperformers in the middle, and most selected one of the extremes. This outcome suggests that outperforming organizations understand their environment better; they have a clearer sense of their environment and the influences impacting their organizations. Outperformers believe that openness is impacting them, and they are therefore beginning to respond to that influence in more substantial ways than CEOs from underperforming organizations.
  • CEOs acknowledge the need for continued operational control and are backed by their CFOs to enforce regulatory compliance, drive standardization and avoid waste.
  • CEOs anticipate demands for even more transparency, and the competitive need to open up their organization to collaborate more internally and externally.
  • To draw out the best in their workforces, CEOs are most focused on three organizational attributes. CEOs recognize the need for organizational values and a clear sense of purpose to guide decisions and actions as some formal controls loosen. Clearly, openness increases vulnerability. The Internet – especially through social networks – can provide a worldwide stage to any employee interaction, positive or negative. For organizations to operate effectively in this environment, employees must internalize and embody the organization’s values and mission.
  • Four traits stand out as critical for employees’ future success: being collaborative, communicative, creative and flexible. Given their intent to create greater openness, CEOs are looking for employees who will thrive in this kind of atmosphere. CEOs are increasingly focused on finding employees with the ability to constantly reinvent themselves. These employees are comfortable with change; they learn as they go, often from others’ experiences.
  • Thirty percent more outperformers recognize the emergence of openness and see it as a more pervasive influence than underperformers. And there is the outperformers’ advantage: these organizations demonstrate a much stronger track record of successfully managing change.   Examples: the MTN Group and Safaricom, leading telecommunications providers in Africa and the Middle East. Out of necessity there has been a synthesis of telco and payments systems in Africa, because there simply was no landline and no effective established payments and banking network in existence. Therefore telco organizations started to offer these services as clear opportunity. This is now moving throughout rest of world.   Example: Docomo Japan is entering into partnerships with banks. From a very early stage this organization had contacts with payments organizations and partnerships with retailers such as 7-eleven and now are pursuing more explicit partnerships with major financial institutions such as Bank of Tokyo Mitsubishi UFJ to form more formal payments businesses, such as Jibun.
  • For CEOs, it’s no longer a question of should the organization become more open and collaborative? But rather, it’s how do I run an open organization? Replace rulebooks with shared beliefs: as a practical matter, CEOs cannot manage openness through process alone. In an open environment marked by constant change and increased complexity, organizations need a new way of enabling everyday decision making. Employees must instinctively know how to handle unexpected situations. Their choices and actions are best guided by shared beliefs and values. Build future-proof employees: it is difficult for organizations to predict the emerging capabilities they will need even just a few years from now. CEOs can’t teach employees to be “future proof,” but they can create an environment where these traits develop more naturally. Provide the means to collaborate at scale: as organizations globalize and the boundaries between functions blur, organizations need more extensive, sophisticated methods of collaborating.
  • Business challenge: this organization had problems with compliancy and the question of ethical behavior by its employees.
  • Business challenge: the organization recognized that major competitors were dramatically increasing the amount of innovation and felt they needed to respond. They wanted to improve their speed and quality of innovations.
  • Business challenge: this organization recognized that key market segments started to embrace social media aggressively. It wanted to help spur growth and greater loyalty among core customers by embracing social media and explicitly including input in product development.
  • Bausch + Lomb Mobile Business Intelligence: http://www.hrcommunication.com/Main/Articles/Bausch_Lomb_communications_team_3_13000_a_global_r_2369.aspx B&L uses the entire workforce to communicate via social media: Baush & Lomb's intranet, "the eyeway", features employee-written articles. McDougall (VP of corporate communications) calls this “deputizing employees.” He simply asks employees to handle a variety of internal and external communications tasks, including posting videos to an internal YouTube site, writing articles for the intranet, and monitoring social media and the news. McDougall estimates 60 to 70 percent of the company’s intranet content comes from employees. “Like any multinational, we have monitoring systems set up from the media and social media perspective,” McDougall says. “They’re great, but the best monitoring is still your employees, who may see a trade article, a local news media report, a tweet or a Facebook posting.” Employee Social Platform: http://www.noesis-design.com/portfolio/social_media/bausch_lomb Bausch + Lomb's internal social platform allows their international sales agents to log in and communicate based on their experiences out in the field. This has proved invaluable in terms of providing information, for example, on what a competitor might be doing, in an instant format to all other agents Internal Media/ TV channels improves employee integration/ satisfaction http://images.tmcnet.com/tmc/vertical/businessvideo/pdf/videoCaseStudies/VCS_EEVA_BL_PDF.pdf Bausch & Lomb Achieves Tangible ROI Using Video communications and media relations team wanted to be able to reach as many key constituents as possible, and to do so in a way that provided a very user-friendly experience for end users. Bausch & LombTV The platform at the heart of Bausch & Lomb’s video initiatives is called Bausch & Lomb TV, which is the company’s branded internal video portal and which is based on technology provided by The FeedRoom. Within the video portal, employees can click on a variety of different channels, such as company TV commercials, information about the company, training videos, as well as channels dedicated to business units such Reduced Costs by Eliminating Shipments of DVDs — Bausch & Lomb has generated significant cost savings by using online video as a primary communications tool for many different types of content that was previously published to VHS tapes or DVDs and shipped to locations all around the world at considerable cost. Enhanced Communications with Employees in Native Languages — The company has been able to reach its wide base of geographically dispersed employees with video content such as messages from senior executives, but now with the closed captioning capabilities the firm is reaching more employees with content that can be subtitled in their native language. This really helps to create a more connected feeling among employees according to McDougall. Additional support: General Customer Service As Temkin says, it shows a recognition that improving customer service must be a "cross-functional, transformative effort" rather than a collection of isolated departmental or divisional activities. http://www.itbusinessedge.com/cm/blogs/all/forget-aligning-it-with-business-bausch--lomb-aligns-it-with-customer/?cs=11665
  • CEOs are searching for customer insight. But even if they discover it, are their organizations equipped to respond with relevance and speed? To effectively engage an individual consumer, client or citizen, organizations must weave together insights about the whole person from all kinds of sources. They will need stronger analytics capabilities to uncover patterns and to act on insights.   Examples: Customers share insights into what they value individually, and when and how they want to interact Westfield Insurance - Identify high-value and high-potential customers and maximize their lifetime value through customer profiling, micro-segmentation, and analysis - Improve understanding of market potential and competitive forces to help make better decisions   To connect individually, CEOs plan a step change in social media interaction and continuing face-to-face engagement Frito Lay Europe – Uses Facebook, Twitter, YouTube, and on local social networks (Hyves in Netherlands for example) to set up contests across the global to collect "Mystery Flavors": guess the flavors and win 50,000 Euros. First Lays collects ideas for new flavors, and then it selects a top 6 and reveals the flavors one by one. You can guess the flavors in the mystery bags and win a price.
  • Organizations are under intense pressure to respond not only how customers want, but also when and where. Immediacy has value. Organizations can profit from unique insights they discover about customers. But long-term value comes when organizations use that knowledge to help individual customers achieve their own desired outcomes. From our 2012 Retail Study, we learned that customers will share information if they perceive a benefit from doing so.
  • In terms of investment, CEOs are prioritizing customer insights far above other decision areas. A significant 73 percent of CEOs are making significant investments in their organizations’ ability to draw meaningful customer insights from available data. Although customer insight has always been highly prized, in recent years, the pursuit has changed in two key ways. First, there’s far more raw data to draw from than ever before. And second, “knowing the customer” is no longer confined to segmentation, statistical averages and historical inferences.
  • CEOs recognize the need for improved capabilities. Seven out of every ten CEOs are making major changes in their organizations to deepen the understanding of individual customer needs. CEOs are implementing extensive changes to enable faster, more relevant responses to markets and individuals.
  • According to CEOs, face-to-face interaction via their sales forces and other institutional representatives is by far the most dominant method of engaging with customers today. But the future landscape looks drastically different. Currently, social media use is so low today, but is expected to displace traditional media massively over the next 3 to 5 years. Face-to-face interaction will not go away – -- the channels of significance will be the ones where there is interaction, i.e. two-way communication rather than one-way communication.   A major gap now exists between the existing activities in social media space and the extent to which social media will be embraced in the future. CEOs are challenged by what to do with social media, how to use it, how to manage their organization, putting together frameworks, how to drive revenues from it, how to incorporate feedback in a meaningful way. There is a big gap that CEOs recognize needs to be filled. Social media usage is expecting to grow from 16% now to 57% in the next 3 to 5 years. This is a massive challenge and opportunity for CEOs.
  • Across the three dimensions of access, insights and action, outperformers far surpass underperforming peers. Essentially, they are insight-driven. Across the full sample, though, one-quarter of CEOs say their organizations operate below par in terms of driving value from data. CEOs expressed frustration about their inability to capitalize on available information.   This is a double positive: CEOs from outperforming organizations are assessing whether they also outperform their competitors in their abilities to access data, draw insights from data, and translate insights into actions. It is very clear that outperforming organizations are simply much better in these areas. There seems to be a strong correlation between the ability to tap into and use data effectively and performance.
  • Let “big data” reveal the customer you never knew: in our connected economy, data is a critical new “natural” resource. And knowing how to effectively access, analyze and use it is crucial to understanding and engaging individual customers. Listen lavishly, respond with focus: the goal of understanding customers better is to be discriminating and perhaps offer less – exactly what this individual customer needs, precisely when and where he or she needs it. Be where your customers expect you to be: mobility is supersizing customer expectations. Organizations have a tremendous opportunity to create value out of immediacy – to be ready with relevant services and information in the context of the moment.
  • Business challenge: the customer base of the organization’s business was changing and developing greater expectations. They wanted to be recognized on a more individual basis than part of a group and wanted to understand how they compared to other people like themselves as they made their financial decisions.
  • Business challenge: After the global economic crisis, banking received very bad press and response from the public for two years. And banks recognized the need to re-engage effectively with their customers and to be more responsive, to their customer needs and aspirations.
  • Business challenge: The organization began to understand that with the poor economic environment they needed to engage with their customers on a deeper more emotional level. They decided to pursue a strategy incorporating social business to understand their customers better, respond more effectively and to build loyalty and trust and customer commitment.
  • Since 1957, Magazine Luiza has connected with customers in Brazil on a human level, to fulfill dreams and provide a happy and memorable experience.   Magazine Luiza provides an online store and more: In their stores, shoppers sit with associates who guide them on Internet shopping trips Local stores act as social hubs and offer community services, like cooking classes or computer training The online site contains a virtual salesperson “Lu”, interacting with customers In response to today’s customer individualization, Magazine Você (“Your Store”), allows anyone to create personalized storefronts and share them via Facebook or Orkut: Store “owners” earn a commission when selling products Conversion rates are running higher than the retailer’s online store   Already, more than 20,000 social stores have sprung up. Magazine Luiza expects to touch 1 million customers within one year of launch.
  • Amplify innovation with partnerships: with nearly 70 percent of CEOs aiming to partner extensively, what will make this a differentiating strategy? Rising complexity and escalating competition have made partnering a core innovation strategy for many organizations. But to enable sustained, fruitful innovation partnerships, organizations will need deeper, more integrated relationships. Partnering organizations will have to share collaborative environments, share data – and share control. They’ll need to enable close working relationships among staff, not just executives. And even when the organization is performing well, CEOs must occasionally break from the status quo and introduce new external catalysts, unexpected partners and some intentionally disruptive thinking.   Examples: Commitment to external partnering has grown significantly American Express - Formed relationships with leading social media organizations to promote innovation in customer engagement - Partnered with Twitter to create location-specific discounts for customers when they tweet their location - Created "Small Business Saturday“ by offering a $ credit to customers who spend at participating small businesses   Virtually all organizations now partner, creating new avenues for innovation Toyota - Formed collaborative partnerships with suppliers to promote innovation - Reduced procurement costs and improved component design
  • Partnering is now at an all-time high. In 2008, a little over half of the CEOs we interviewed planned to partner extensively. Now, more than two-thirds intend to do so. Partnering is pervasive: over the next five years, external partnerships will become even more critical to CEOs’ operating strategies.  
  • CEOs are supported by their CIO and CMO – all working together to enable effective partnerships. For CIOs, increased partnering is associated with a desire to refine the mix of capabilities. CMOs increase use of external partnerships in the areas of sales, analytics, direct marketing, and IT skills.
  • More than half of the CEOs told us they intend to partner extensively to innovate. Financially successful organizations are even more inclined to innovate with partners.   Innovation is becoming more fundamental and foundational to organizations. But as they start to focus their energy on their core capabilities, they recognize that much of the dynamic input ideas and processes that they need to incorporate are best obtained from other organizations rather than themselves. Outperforming organizations have begun to more aggressively pursue and embrace partnerships with other organizations, business partners, communities of interest, academic institutions, and community organizations to pursue innovation.
  • When comparing outperformers with underperformers, we saw no significant difference in their approaches to product and service innovation. Both groups have similar plans for integrating, bundling and tailoring products and services, and extending their product/service portfolios. Where they differ is in their approach to business model innovation. While underperformers focus more on improving operations and redefining their own enterprise models, outperformers have more ambitious innovation targets. They intend to upset entire industries. As a group, outperformers are 50 percent more likely to break into other industries and twice as inclined to invent entirely new ones.   Examples: Entering different markets Swatch (Swiss watch maker) to sell hydrogen cars: http://www.zimbio.com/Hydrogen+vehicles/articles/qxPKxS9-0K6/Time+Swatch+Sell+Hydrogen+Cars Apple went into phones after it was good at making portable media players, and it went into advertising after it had millions of people using its apps on a daily basis. People are now speculating that Apple will move into the TV industry   Create entirely new industries Comcast - Comcast piloted Xcalibur, its next generation cloud-based TV platform that aims to revolutionize the way people watch TV - Xcalibur moves beyond set top boxes to leveraging cloud architecture to deliver live TV service to any internet-connected device Value Created - Meets customer demands for easier access to TV and other internet-enabled content - Delivers content to a broader range of devices - Creates new apps faster and more cheaply - Makes UI changes faster and easier
  • How can CEOs help their organizations connect with partners in new ways that accelerate innovation? Fundamentally change how you partner: as the pressure to innovate (and the cost to do so) mounts, CEOs are reevaluating how they engage partners. The need for transparency is rising. Control and governance must increasingly be shared. Make partnerships personal: as with customers and employees, technology now presents opportunities for much deeper connections with partners. Break collaboration boundaries: to address rising complexity, organizations need to look beyond traditional partners and conventional views on innovation for new inspiration and necessary capabilities.
  • Business challenge: the organization wanted to be relevant to the next generation of consumers, and to fortify its role as the credit card for the social media generation.
  • Business challenge: As the organization had grown aggressively over the past 5 to 10 years, it needed to identify ways to continue its growth trajectory, offering relevant high quality items and avoiding constraints of scale and ability to deliver.
  • Business challenge: in order to introduce greater innovation into the organization, they needed to get input and stimulation from outside their organization to identify and action opportunities that may not have been clear or actionable without the help of an external partner.
  • Royal Dutch Shell Biofuels : Sugar Cane Royal Dutch Shell Plc (RDSA) , the world’s biggest distributor of bio-fuels, is shifting research to waste from sugar-cane farming after ending an algae project in Hawaii . Shell, Iogen Corp. and Codexis Inc. (CDXS) have been researching enzymes to produce cellulosic ethanol from wheat stalks and sugar-cane bagasse, a sugar industry waste product. The Anglo- Dutch company has set up a $12 billion venture with Cosan SA Industria & Comercio to produce and market traditional sugar- cane ethanol in Brazil, where it’s used to fuel cars. http://www.bloomberg.com/news/2011-04-08/shell-iogen-shifting-biofuel-technology-focus-to-brazil-sugar-cane-waste.html http://www.biofuelsdigest.com/bdigest/2011/01/31/shell-exits-algae-as-it-commences-year-of-choices/ Pine/ Corn: Three global companies from the worlds of agriculture, petroleum and car manufacturing are lead investors in a company called Virent, which has  developed a bio-gasoline that is practically the molecular equivalent of conventional gasoline. The milestone is significant because the feedstock consists of woody, non-food waste from pine and corn (aka corn stover), The partnership includes Honda, Shell, and Cargill, http://cleantechnica.com/2011/06/06/cargill-shell-and-honda-team-up-to-make-gasoline-from-pine-and-corn-waste/ Natural Gas http://www.popsci.com/technology/article/2011-05/harvest-natural-gas-ocean-shell-building-worlds-largest-man-made-floating-object. Shell is making good on its promise to build the largest object ever to float on water, announcing Friday it would build the Prelude FLNG Project to harvest offshore natural gas fields. The gargantuan ship will suck up the equivalent of 110,000 barrels of oil per day. Without an oceangoing facility, it would be impossible to harvest natural gas that far from land, Shell said. The Prelude will be the first facility of its kind, but not the last — the design can accommodate a wide range of gas fields, said Malcolm Brinded, executive director for Shell’s Upstream International, in a news release. So someday, massive floating gas factories could be deployed in various oceans throughout the world. Additional Support Research on water quantity: http://www.shell.com/home/content/media/speeches_and_webcasts/2012/voser_worldwaterforum_marseille_12032012.html
  • Undoubtedly, our world and the institutions and people in it are becoming more connected. The question is: How will CEOs respond organizationally and personally?
  • To lead in this period of rapid, disruptive change, CEOs told us three traits are most crucial: customer obsession, inspirational leadership and leadership teaming. These characteristics actually reinforce and complement their goals for the organization: Customer-obsessed leaders will drive the organization toward deeper, more contextual customer insights. Inspirational leaders will engage, motivate and guide employees with values and shared purpose rather than tight control. Leaders who team will model collaboration for their organizations. They’ll be coalition builders, internally and externally.   Interestingly, these three areas map very closely to the areas identified by the CEOs as key sources of economic value: Customer obsession maps closely to chapter 2 Inspirational leadership maps to chapter 1 Leadership teaming maps very closely to chapter 3: partnering for innovation, the recognition from CEOs that they need to team with other leaders in their C-suite and other organizations in order to achieve their objectives
  • Leading through Connections

    1. 1. IBM Institute for Business Value © 2012 IBM Corporation
    2. 2. IBM Institute for Business ValueThe Global CEO Study 2012 is the fifth biennial CEO study, buildingon our insights and findings over the last 8 years 2006 2008 2010 2012 2004 Expanding the The Enterprise Capitalizing on Leading through Your turn Innovation Horizon of the Future Complexity Connections Revenue growth is Business model Hungry for change Embody creative Empowering Revenue growth is Business model Hungry for change Embody creative Empowering the #1 priority the #1 priority innovation matters innovation matters Customers as Customers as leadership leadership employees through employees through Responsiveness is External opportunity to Reinvent customer values Responsiveness is External opportunity to Reinvent customer values key competence key competence collaboration collaboration differentiate differentiate relationships relationships Engaging customers Engaging customers Improving internal Innovation must be Business model Build operating as individuals Improving internal Innovation must be Business model Build operating as individuals capabilities as first orchestrated from innovation, global dexterity Amplifying innovation capabilities as first orchestrated from innovation, global dexterity Amplifying innovation step to growth step to growth the top the top business designs business designs with partnerships with partnerships 456 interviews 456 interviews 765 interviews 765 interviews 1130 interviews 1130 interviews 1541 interviews 1541 interviews 1709 interviews 1709 interviews2 © 2012 IBM Corporation
    3. 3. IBM Institute for Business ValueIn this largest known sample, we spoke with over 1700 CEOs –battle-tested leaders with an average tenure of 6 years The study represents organizations in 64 countries across 18 industries Regions Sectors North America Australia / New Zealand Communications Industrial Western Europe Growth Markets Distribution Public Japan Financial ServicesNote: The CEO response sample (n=1709) has been weighted based on 2010 Regional GDP of the IMF World Economic Outlook3 © 2012 IBM Corporation
    4. 4. IBM Institute for Business ValueWe compared outperformer and underperformer responses andhave highlighted key differences Three performance categories Three performance categories Particular attention on Outperformers Particular attention on Outperformers Underperformers Outperformers Low revenue growth High revenue growth and low profitability and high profitability  No significant difference between No significant difference between outperformers and underperformers outperformers and underperformers on 82% of tested characteristics on 82% of tested characteristics → Though outperformers and → Though outperformers and underperformers often say the same, underperformers often say the same, outperformers are superior at doing what outperformers are superior at doing what they say they say → In this study we focus on common → In this study we focus on common performance factors, while we highlight performance factors, while we highlight Peer Performers the most significant differences between the most significant differences between All other performance out- and underperformers out- and underperformers combinationsNote: Relative performance is defined by CEO self-assessment of revenue growth and profitability compared to industry peersSource: QB “How does the revenue growth of your organization compare to your industry peers over the past 3 years?”; QC “How does your4 organization’s profitability (or efficiency for public sector) compare to your industry peers over the past 3 years?” © 2012 IBM Corporation
    5. 5. IBM Institute for Business Value5 © 2012 IBM Corporation
    6. 6. IBM Institute for Business Value6 © 2012 IBM Corporation
    7. 7. IBM Institute for Business ValueTechnology has become the most important external force for CEOsand significantly impacts how they build economic value What we learned from all CEOs What we learned from all CEOs What outperformers do differently What outperformers do differently Organizational openness introduces new Organizational openness introduces new Outperformers embrace greater Outperformers embrace greater opportunities to create value through opportunities to create value through openness, and excel at executing openness, and excel at executing employee collaboration employee collaboration tough change tough change Outperformers strongly differentiate Outperformers strongly differentiate Customers reveal insights into what, Customers reveal insights into what, through better data access, insight and through better data access, insight and when and how they want to interact when and how they want to interact translation into actions translation into actions Outperformers are more likely Outperformers are more likely Virtually all organizations now partner, Virtually all organizations now partner, to partner for innovation, disrupt, and to partner for innovation, disrupt, and creating new avenues for innovation creating new avenues for innovation derive revenue from new sources derive revenue from new sources7 © 2012 IBM Corporation
    8. 8. Key DiscoveryIBM Institute for Business ValueFor the first time, CEOs identify technology as the most importantexternal force impacting their organizations External forces that will impact the organization 2004 2006 2008 2010 2012 71% Technology factors 69% People skills 68% Market factors Macro-economic factors Regulatory concerns Globalization Socio-economic factors Environmental issues Geopolitical factorsSource: Q1 “What are the most important external forces that will impact your organization over the next 3 to 5 years?”8 © 2012 IBM Corporation
    9. 9. Key DiscoveryIBM Institute for Business ValueInternally, CEOs focus on how technology facilitates primary sourcesof sustained economic value Key sources of sustained economic value Human capital 71% 71% Customer relationships 66% 66% Products / services innovation 52% 52% Brand(s) 43% 43% Business model innovation 33% 33% Technology 30% 30% Partnership networks 28% 28% Data access / data-driven insights 25% 25% R&D, intellectual property 22% 22% Price / revenue innovation 19% 19% Assets (physical, infrastructure) 15% 15% Corporate social responsibility 13% 13% Access to raw materials 8% 8%Source: Q24 “What do you see as the key sources of sustained economic value in your organization?”9 © 2012 IBM Corporation
    10. 10. Outperformance driversIBM Institute for Business ValueOutperforming organizations are especially focused on combiningtechnology with the business to drive innovation and growth Integrating business and technology for innovation 68 % more 69% 69% 41% Outperformers UnderperformersSource: QE “To what extent has your organization integrated business and technology to innovate?”10 © 2012 IBM Corporation
    11. 11. IBM Institute for Business ValueCEOs create more economic value by cultivating new connectionswithin and across three domains11 © 2012 IBM Corporation
    12. 12. IBM Institute for Business ValueHow will CEOs create more economic value by empoweringemployees through values? Organizational openness introduces Organizational openness introduces new opportunities to create value new opportunities to create value through collaboration through collaboration To re-balance control with openness, To re-balance control with openness, CEOs are focused on values, CEOs are focused on values, collaboration and mission collaboration and mission Outperformers embrace greater Outperformers embrace greater openness, and excel at executing openness, and excel at executing tough change tough change12 © 2012 IBM Corporation
    13. 13. Key DiscoveryIBM Institute for Business ValueThe challenge CEOs face is how to balance operational control withorganizational openness to capture benefits from collaboration Organizational impact from competing influences 48% 35% 37% 33% 30% 17% Outperformers Underperformers Operational control Balance between Organizational openness Tight operational and financial openness and control Opening of organizations internally control to ensure compliance, and externally and empowerment of avoid waste, and enforce standards, individuals to facilitate innovation, norms and behaviors collaboration, and creativitySource: Q4 “To what extent will the following competing influences impact your organization?”; CEO average is 33% on control, 23% balanced, and 44% on openness13 © 2012 IBM Corporation
    14. 14. IBM Institute for Business ValueOperational control provides value to organizations, including costreduction, operating margin and security CFOs report that pressure remains high to control costs and increase efficiency Pressure to reduce cost base 78% 78% Need for faster decision making 74% 74% Demand for external transparency 69% 69% Product / service demand growth 61% 61% Ability to attract and retain talent 56% 56% Access to short-term liquidity / long-term capital 40% 40%Source: IBM Institute for Business Value, The Global CFO Study 2010. Question asked: “In the next 3 years, how will the following conditions change14 in your industry / sector?” © 2012 IBM Corporation
    15. 15. IBM Institute for Business ValueHowever, CEOs plan dramatic improvements in internal and externalcollaboration, requiring organizational openness Changing the organizationPartnering/collaborating with other organizations 53% 53% Internal collaboration 52% 52% Decision-making processes 43% 43% C-suite composition, skills and responsibilities 41% 41% Management and/or organization structure 40% 40% Governance models 31% 31% Values of your organization 18% 18% Supervisory board composition 15% 15%Source: Q19 “To what extent will you sustain or make changes to the following aspects of your organization over the next 3 to 5 years?”15 © 2012 IBM Corporation
    16. 16. Key DiscoveryIBM Institute for Business ValueTo re-balance control with openness, CEOs are focused on values,collaboration and mission Organizational attributes to engage employees Ethics and values 65% 65% Collaborative environment 63% 63% Purpose and mission 58% 58% Ability to innovate 51% 51% Industry leadership 40% 40% Stability of the organization 37% 37% Work-life balance 35% 35% Personal autonomy 31% 31% Financial rewards 31% 31% Work flexibility 24% 24% Cultural diversity 21% 21% Customizable compensation 18% 18% Comprehensive mentoring 18% 18%Source: Q18 “What are the most important organizational attributes to engage employees?”16 © 2012 IBM Corporation
    17. 17. Key DiscoveryIBM Institute for Business ValueIn this new environment, key success factors for employees include:collaboration, communication, creativity and flexibility Personal characteristics for employee success Collaborative 75% 75% Communicative 67% 67% Creative 61% 61% Flexible 61% 61% Opportunity seeking 54% 54% Analytical / quantitative 50% 50% Technology-savvy 41% 41% Globally-oriented 41% 41% Assertive 25% 25% Disruptive 16% 16%Source: Q17 “What are key personal characteristics that help employees to be more successful in a connected economy?”17 © 2012 IBM Corporation
    18. 18. Outperformance driversIBM Institute for Business ValueOutperformers excel at executing tough change Ability to manage change 73 % more 69% 69% Outperformers Underperformers 40%Source: Q3 “How successful has your organization been at managing change in the past?”; average ability to manage change is 54%18 © 2012 IBM Corporation
    19. 19. IBM Institute for Business ValueSo, how do you empower employeesthrough openness?  Confront cultural reality Confront cultural reality 1. Replace rulebooks with 1. Replace rulebooks with  Build values employees will live out Build values employees will live out shared beliefs shared beliefs  Recalibrate controls Recalibrate controls  Create unconventional teams Create unconventional teams 2. Build future-proof 2. Build future-proof  Concentrate on experiential learning Concentrate on experiential learning employees employees  Empower high-value employee networks Empower high-value employee networks  Pursue social collaboration technologies Pursue social collaboration technologies 3. Provide the means to 3. Provide the means to  Devise incentives that foster collaboration Devise incentives that foster collaboration collaborate at scale collaborate at scale  Re-imagine employee “suggestion box” Re-imagine employee “suggestion box”19 © 2012 IBM Corporation
    20. 20. IBM Institute for Business ValueReplace rulebooks with shared beliefsCEO cannot manage openness through process alone. Inan open environment, employees must instinctively know Industrialhow to handle unexpected situations – choices and productsactions are best guided by shared beliefs and values business, Europe  Confront cultural reality Purpose Take a hard look at your corporate character – not  Build and align common values the reputation you intend to project, but what is to promote performance with integrity actually revealed through the decisions and actions  Create ambassadors among of employees and leaders employees  Build values employees will live out Activities Allow the organization to collectively compose its  Articulated core beliefs and core values – to develop a shared belief system, expected behaviors employees must help create it  Enabled employee dialog  Recalibrate controls across intranet Key is determining which rules to keep and refine –  Promoted social polling and seek to eliminate those that can be “controlled” twitter-like platform through values20 © 2012 IBM Corporation
    21. 21. IBM Institute for Business ValueBuild future-proof employeesOrganizations need employees who are equipped to adapt– those who are collaborative, communicative, creative Consumerand flexible products business, Europe  Create unconventional teams Intentionally mix specialties and expertise so that Purpose employees rub shoulders with diverse types of people  Identify and leverage synergies who think differently and have different backgrounds across lines of business  Expand value created from  Concentrate on experiential learning innovation Broaden the range of situations and experiences that employees are exposed to in their normal work – Activities incorporate external influences, like customers and  Formed cross line-of-business partners, wherever possible knowledge community  Empower high-value employee networks  Engaged external partners to Encourage employees to develop a diverse and help identify synergies extensive network of contacts – don’t underestimate  Initiated training to promote the value of their social networks as both potential collaboration and innovation collaborators and prospective customers21 © 2012 IBM Corporation
    22. 22. IBM Institute for Business ValueProvide the means to collaborate at scaleAs organizations globalize and the boundaries betweenfunctions blur, organizations need more extensive, Consumersophisticated methods of collaborating products business, USA  Pursue social collaboration technologies Ensure employees can quickly find needed Purpose expertise and can engage the collective intelligence  Promote sustained growth of the organization – capture experts’ knowledge in through empowerment, responsibility and trust searchable repositories  Build skills and become part of  Devise incentives that foster collaboration local communities Be sure employees are clear on how collaboration Activities benefits them individually – intrinsic motivators are  Introduced social media including visibility and reputation, competitive spirit and comment spaces, blogs and an shared goals idea network  Re-imagine the employee “suggestion box”  Integrated enhanced podcasts Use social media technologies to pursue good with two-way interactions ideas – through open dialog, collective construction  Pursued community out-reach of solutions and feedback on results22 © 2012 IBM Corporation
    23. 23. IBM Institute for Business ValueCase Study: Bausch + Lomb – One team focused on one mission For over 150 years, Bausch + Lomb is an eye-health pioneer, active in over 100 countries. Recently B+L initiated a major cultural transformation to reinvigorate and refocus its innovative spirit:  Providing direction through a clearly defined vision, mission and strategy  Introducing “High Performance Behaviors”  Inverting the classic management pyramid through an increased focus on front-line managers Social and mobile technologies facilitate communication and sharing of best practices among employees:  Let people communicate at work like they do at home, through internal social platforms  Get information to and from the field as quickly as possible, through early adoption of handheld tablets for customer-facing employees In 2011, revenues hit an all-time company high, quadrupling the average annual growth rate.23 © 2012 IBM Corporation
    24. 24. IBM Institute for Business ValueHow will CEOs create more economic value by engaging customersas individuals? Customers share insights into what they Customers share insights into what they value individually, and when and how value individually, and when and how they want to interact they want to interact To connect individually, CEOs plan a To connect individually, CEOs plan a step change in social media interaction step change in social media interaction and continuing face-to-face and continuing face-to-face engagement engagement Outperformers strongly Outperformers strongly differentiate by better data access, differentiate by better data access, insight, and translation into actions insight, and translation into actions24 © 2012 IBM Corporation
    25. 25. IBM Institute for Business ValueCustomers share insights into what they value individually, andwhen and how they want to interact Customers will share information if they perceive a benefit What is your willingness to provide information in exchange for something relevant to you (non-monetary)? Media usage (e.g. media channels) Demographic (e.g. age, ethnicity) Identification (name, address)Lifestyle (# of cars, home ownership) Location based Medical Financial Completely willing Neutral Completely disagreeSource: IBV Retail 2012 Winning Over the Empowered Consumer Study P04 “What is your willingness to provide information for each of the following items if [pipe primary retailer] provided something relevant to you in exchange?”25 © 2012 IBM Corporation
    26. 26. IBM Institute for Business ValueCEOs identify customer insights as the most critical investment area Drawing insight from information – Areas of improvement Customers 73% 73% Operations 50% 50% Sales 49% 49% Markets and competitors 44% 44% Human resources 43% 43% Supply chain 40% 40% Risk management 38% 38% Financials 32% 32%Source: Q23 “In which areas do you plan to improve your ability to draw meaningful and executable insights from available information?”26 © 2012 IBM Corporation
    27. 27. Key DiscoveryIBM Institute for Business ValueCEOs want to understand individual customers better and respondfaster Change required to meet customer expectations (3 to 5 years) Improve understanding of individual customer needs 72% 72% Improve response time to market needs 72% 72% Harmonize customer experiences across channels 55% 55% Include customers / citizens across product / service life cycle 48% 48% Increase transparency and corporate accountability 47% 47% Increase social and environmental responsibility 44% 44%Source: Q9 “To what extent will your27 © 2012 IBM Corporation organization
    28. 28. Key DiscoveryIBM Institute for Business ValueTo connect individually, CEOs plan a step-change from traditional tosocial media, while continuing face-to-face engagement Mechanisms to engage customers 80% 67% 57% 55% 47% 41% 40% Today 38% 39% In 3 to 5 years 31% 22%22% 16% 15% Face-to-face* Social Websites Channel Call Advisory Traditional media partners centers groups mediaSource: Q8 “What are the three most important mechanisms your organization will use with customers over the next 3 to 5 years?” *Face-to-face / sales force / institutional representatives28 © 2012 IBM Corporation
    29. 29. Outperformance driversIBM Institute for Business ValueOutperformers are twice as good at deriving value from data – key toengaging customers as individuals Outperformers strongly differentiate their organizations in three key areas Outperformers Underperformers108 % more 108 % more 84 % more 57% 57% 54% 54% 54% 54% 31% 26% 26% Access to data Draw insights from data Translate insight into actionSource: Q22 “How good is your organization at driving value from data? [Today]”29 © 2012 IBM Corporation
    30. 30. IBM Institute for Business ValueSo, how do you win the race to gather andconvert data into customer insight and action?  Look outside to complete the view Look outside to complete the view 1. Let “big data” reveal the 1. Let “big data” reveal the  Connect pieces into profiles Connect pieces into profiles customer you never knew customer you never knew  Empower staff with predictive analysis Empower staff with predictive analysis  Listen at an individual level Listen at an individual level 2. Listen lavishly, respond 2. Listen lavishly, respond  Capture what employees see and hear Capture what employees see and hear with focus with focus  Respond with relevance and speed Respond with relevance and speed  Leverage the fact that mobile “changes Leverage the fact that mobile “changes 3. Be where your customers 3. Be where your customers everything” everything” expect you to be expect you to be  Blend the physical and digital worlds Blend the physical and digital worlds  Offer value that stands out Offer value that stands out30 © 2012 IBM Corporation
    31. 31. IBM Institute for Business ValueLet “big data” reveal the customer you never knewToday’s analytics provide opportunities to explore bigdata, detect patterns and reveal new insights – knowing Insurancehow to effectively access, analyze and use data is crucial business,to understanding and engaging individual customers USA  Look outside to complete the view Purpose  Gain deeper insight into agency Incorporate external sources, especially social performance and customer value media and complementary data sets from partners – drivers blend internal and external views to discover  Build “analytical culture” across unexpected insights business units  Connect pieces into profiles Activities Use analytics to distill what’s valuable from an  Identify high-value and high- abundance of data – assemble vital pieces into potential customers and maximize their lifetime value holistic profiles of individual human beings through customer profiling, micro-segmentation, and analysis  Empower staff with predictive analytics Embed insights where front-line decisions are made  Improve understanding of market potential and competitive forces – ensure data-driven decision making is part of to help make better decisions everyday processes31 © 2012 IBM Corporation
    32. 32. IBM Institute for Business ValueListen lavishly, respond with focusIn exchange for more insight, customers wantorganizations to interact selectively and responsibly – Universaloffering what they want, when and where they want it bank, USA  Listen at an individual level Look beyond aggregate customer information based Purpose on market segmentation – use sources that allow  Increase customer satisfaction you to hear directly from individual customers  Improve process, workflow  Capture what employees see and hear effectiveness and time to market Establish easy ways to channel clues employees Activities observe in their customer interactions – incorporate  Introduced social network these insights into your analysis analysis to help identify key opinion leaders, tailor offerings  Respond with relevance and speed and understand behavior and Study each customer touch point and find ways to decision making respond more selectively and create deeper  Established real-time analytics to connections that build loyalty and advocacy assess new product penetration and success32 © 2012 IBM Corporation
    33. 33. IBM Institute for Business ValueBe where your customers expect you to beMobility is elevating customer expectations: organizationshave a tremendous opportunity to create value out of Retailimmediacy – to be ready with relevant services and business,information in the context of the moment USA  Leverage the fact that mobile “changes everything” Purpose Take advantage of location-based services and new  Leverage customer insights forms of e-commerce obtained from past online interactions to formulate  Blend the physical and digital worlds personalized, timely experiences Exploit augmented reality to make mobile part of Activities integrated, multichannel customer experiences  Used mobile capabilities to  Offer value that stands out enhance online and in-store customer personalization and Interact in ways that are attention-grabbing, overall engagement meaningful and tailored to the individual  Improved customer loyalty by anticipating needs and establishing consistent high- quality customer service33 © 2012 IBM Corporation
    34. 34. IBM Institute for Business ValueCase Study: Magazine Luiza – Maintaining a human touch in anonline world Since 1957, Magazine Luiza has connected with customers in Brazil on a human level, to fulfill dreams and provide a happy and memorable experience. Magazine Luiza provides an online store and more:  In their stores, shoppers sit with associates who guide them on Internet shopping trips  Local stores act as social hubs and offer community services, like cooking classes or computer training  The online site contains a virtual salesperson “Lu”, interacting with customers In response to today’s customer individualization, Magazine Você (“Your Store”), allows anyone to create personalized storefronts and share them via Facebook or Orkut:  Store “owners” earn a commission when selling products  Conversion rates are running higher than the retailer’s online store Already, more than 20,000 social stores have sprung up. Magazine Luiza expects to touch 1 million customers within one year of launch.34 © 2012 IBM Corporation
    35. 35. IBM Institute for Business ValueHow will CEOs create more economic value by innovating differentlywith partners? Commitment to external partnering has Commitment to external partnering has grown significantly grown significantly Virtually all organizations now partner, Virtually all organizations now partner, creating new avenues for innovation creating new avenues for innovation Outperformers are more likely Outperformers are more likely to partner for innovation, disrupt, to partner for innovation, disrupt, and derive revenue from new and derive revenue from new sources sources35 © 2012 IBM Corporation
    36. 36. Key DiscoveryIBM Institute for Business ValueOver the past few years, partnering has become increasinglyprevalent – more than two-thirds of CEOs intend to do so Historical comparison of external partnering 25 % more 69% 69% 55% 55% 2012 2008Source: Q16g “What will your operating strategy be in 3 to 5 years, compared to today?” [Partner extensively / Do everything in-house]36 © 2012 IBM Corporation
    37. 37. IBM Institute for Business ValueCIOs and CMOs have diverse motivations for external collaboration For CIOs, increased partnering is associated For CIOs, increased partnering is associated CMOs increase use of external partnerships CMOs increase use of external partnerships with aadesire to refine the mix of capabilities with desire to refine the mix of capabilities in the areas of sales, analytics, and IT skills in the areas of sales, analytics, and IT skills Sales contact/lead management 7% 7% 14% 14% Partnering extensively with other organizations Customer and data analytics 65% 65% 12% 12% 23% 23% Direct/relationship marketing 13% 13% 23% 23% Significantly change mix of capabilities, knowledge and assets IT skills 66% 66% 23% 23% 37% 37% Today In 3 to 5 yearsSource: 2011 CIO Study Q7 “To benefit from global integration will your organization do the following?”; 2011 CMO Study Q16 “What do you do within marketing and what resources will you tap into, to manage marketing?”37 © 2012 IBM Corporation
    38. 38. Outperformance driversIBM Institute for Business ValueOutperformers partner substantially more often for innovation External partnering for innovation 28 % more 59% 59% 46% Outperformers UnderperformersSource: QD “To what extent does your organization collaborate and partner (externally) to innovate?”; CEO average score is 53%38 © 2012 IBM Corporation
    39. 39. Outperformance driversIBM Institute for Business ValueOutperformers pursue more disruptive types of innovation andderive more revenue from new sources Industry model innovation Revenue from new sources 48 % more 94 % more 46% 46% 35% 35% 31% 37 % more 26% 26% 18% 19% Outperformers Underperformers Creating entirely Moving into new industries different industriesSource: Q13 “What key initiatives will you implement over the next 3 to 5 years?”; Q11 “What approximate percentage of your revenue comes from new sources, including new products and services, markets or industries?”39 © 2012 IBM Corporation
    40. 40. IBM Institute for Business ValueSo, how can organizations partner moreeffectively to meet the innovation challenge?  Achieve differentiation through social Achieve differentiation through social 1. Fundamentally change how you 1. Fundamentally change how you innovation innovation partner partner  Expand scope of partnerships Expand scope of partnerships  Tackle the shared governance challenge Tackle the shared governance challenge  Broaden responsibility for managing Broaden responsibility for managing partnerships partnerships 2. Make partnerships personal 2. Make partnerships personal  Foster relationships at each level across Foster relationships at each level across partnering organizations partnering organizations  “Partners” can be a community of people “Partners” can be a community of people  Explore unconventional partnerships Explore unconventional partnerships 3. Break collaboration boundaries 3. Break collaboration boundaries  Think like aadisruptor Think like disruptor  Innovate together as aasystem Innovate together as system40 © 2012 IBM Corporation
    41. 41. IBM Institute for Business ValueFundamentally change how you partnerThe pressure and costs to innovate mount, and boundariesbetween organizations are becoming more porous Payments andinteractions span more functions and are more continuous, travel business, USAwith control and governance increasingly being shared  Achieve differentiation through social innovation Purpose Extend communication and collaboration tools so that  Form relationships with leading peers can interact within and across organizations – social media organizations to integrate data resources to reveal unexpected, promote innovation in customer mutually beneficial insights engagement Activities  Expand scope of partnerships  Partnered with Twitter to create Evaluate ways to extend and connect existing location-specific discounts for partnerships on innovation, to include ideation, R&D, customers when they tweet their and also sales, marketing or HR location  Created "Small Business  Tackle the shared governance challenge Saturday“ by offering a $ credit to Establish ways to share key aspects of control – such customers who spend at as prioritization, decision making and funding – that participating small businesses are traditionally dominated by one partner41 © 2012 IBM Corporation
    42. 42. IBM Institute for Business ValueMake partnerships personalTechnology now presents opportunities for much deeperconnections with partners – opportunities for innovation – Retail business,both spontaneous and orchestrated – are rising in step Chinawith interconnectedness  Broaden responsibility for managing partnerships Embed relationship management capabilities within Purpose the organization – use centralized alliance  Enhance strategic partnerships management functions to supply specialized skills by engaging employees across sales channels  Foster relationships at each level across partnering Activities organizations  Created strategic distribution Provide avenues to develop personal connections partnerships focused on product among peers at every level planning and promotions  Consider the possibility of “partners” being a  Employees gather customer insights which are routed to community of people partner organizations to inform Don’t limit your view to organizations – your most future product development valuable “partnership” might be a group of individuals42 © 2012 IBM Corporation
    43. 43. IBM Institute for Business ValueBreak collaboration boundariesTo address rising complexity, organizations need to lookbeyond traditional partners and conventional views on Automotiveinnovation for new inspiration and necessary capabilities business, Japan  Explore unconventional partnerships Study nontraditional alliances emerging in other industries and look for parallel applications in your Purpose own – integrate capabilities not commonly found in  Innovate processes to reduce the your own industry number of components used in  Think like a disruptor car manufacturing Stretch thinking beyond business as usual, even  Improve speed and flexibility of when business as usual is working – question production norms, introduce new stimulation from outside Activities  Innovate together as a system  Formed collaborative Approach untenable issues or grand challenges by partnerships with suppliers to partnering across the entire system – with promote innovation competitors, governments, non-governmental  Reduced procurement costs and organizations and more improved component design43 © 2012 IBM Corporation
    44. 44. IBM Institute for Business ValueCase Study: Royal Dutch Shell – Partnering to power the futureShell has a long history of partnering for innovation, since 1907.Collaboration is focused on energy innovations, working with partners to diversifythe fuel supply and reduce its environmental impact: Production of sustainable, low-carbon biofuels Developing of next-generation biofuels from waste products, and hydrogen fuel-cell technology Reducing emissions of traditional fuels used in transportation, such as natural gasTo address energy and environmental challenges, Shell is working with experts toexplore relations between energy, water and food systems to gain a deeperunderstanding of long-term risks and opportunities: Sustainable urban design Reduce water use for electricity generation Alternative transport fuels and heating44 © 2012 IBM Corporation
    45. 45. IBM Institute for Business Value45 © 2012 IBM Corporation
    46. 46. Key DiscoveryIBM Institute for Business ValueIn this period of rapid and disruptive change, CEOs lead whilelearning, outlining three traits critical to their personal success CEO characteristics for success Customer obsession 61% 61% Inspirational leadership 60% 60% Leadership teaming 58% 58% Global mindset 48% 48% Competitive instinct 38% 38% Boldness 35% 35% Transparent 34% 34% Risk tolerant 33% 33% Disruptive creativity 33% 33% Financial skills 24% 24% Technology savviness 23% 23% Diversity-driven 20% 20% Environmentally / socially devoted 16% 16%Source: Q25 “What are the five most important characteristics that a CEO needs to be successful over the next 3 to 5 years?”46 © 2012 IBM Corporation
    47. 47. IBM Institute for Business ValueCEOs will lead bold change by providing inspirational leadership totheir people, customers and collaboratorsSource: Q25 “What are the five most important characteristics that a CEO needs to be successful over the next 3 to 5 years?”47 © 2012 IBM Corporation
    48. 48. IBM Institute for Business ValueWe analyzed over 10,000 quotes to uncover the deeper thoughts ofCEOs that relate to their key personal aspirations Customers Customers Teaming Teaming Inspiration Inspiration Leadership LeadershipSource: Qu48 © 2012 IBM Corporation ote
    49. 49. SummaryIBM Institute for Business ValueHow CEOs drive new economic value through connections Empowering employees through values Empowering employees through values  Organizational openness introduces new opportunities to create value through Organizational openness introduces new opportunities to create value through employee collaboration employee collaboration  To re-balance control with openness, CEOs are focused on values, To re-balance control with openness, CEOs are focused on values, collaboration and mission collaboration and mission  Outperformers embrace greater openness, and excel at executing tough Outperformers embrace greater openness, and excel at executing tough change change Engaging customers as individuals Engaging customers as individuals  Customers share insights into what they value individually, and when and how Customers share insights into what they value individually, and when and how they want to interact they want to interact  To connect individually, CEOs plan a step change in social media interaction To connect individually, CEOs plan a step change in social media interaction and continuing face-to-face engagement and continuing face-to-face engagement  Outperformers strongly differentiate by better data access, insight, and Outperformers strongly differentiate by better data access, insight, and translation into actions translation into actions Amplifying innovation with partnerships Amplifying innovation with partnerships  Commitment to external partnering has grown significantly Commitment to external partnering has grown significantly  Virtually all organizations now partner, creating new avenues for innovation Virtually all organizations now partner, creating new avenues for innovation  Outperformers are more likely to partner for innovation, disrupt, and Outperformers are more likely to partner for innovation, disrupt, and derive revenue from new sources derive revenue from new sources49 © 2012 IBM Corporation
    50. 50. IBM Institute for Business ValueTo continue the conversation... For more information about this study Access interactive content and listen to and to get the full version of this report, CEOs in their own words by downloading see www.ibm.com/ceostudy2012 the IBM IBV app for Android or iPad50 © 2012 IBM Corporation
    51. 51. IBM Institute for Business Value51 © 2012 IBM Corporation
    52. 52. SummaryIBM Institute for Business ValueWhat makes outperformers different? Empowering employees through values Empowering employees through values  73% more successful in managing change 73% more successful in managing change  30% more emphasis on organizational openness 30% more emphasis on organizational openness  almost 3 more years in leading position (time-in-role) almost 3 more years in leading position (time-in-role) Engaging customers as individuals Engaging customers as individuals  108% better at access to data 108% better at access to data  108% better at drawing insights from data 108% better at drawing insights from data  84% better at translating insights into action 84% better at translating insights into action Amplifying innovation with partnerships Amplifying innovation with partnerships  68% more likely to integrate business and technology for innovation 68% more likely to integrate business and technology for innovation  48% more are moving into different industries 48% more are moving into different industries  37% more likely to derive revenue from new sources 37% more likely to derive revenue from new sources52 © 2012 IBM Corporation
    53. 53. BackupIBM Institute for Business ValueWithin today’s volatile and uncertain environment, four major trendsare apparent Globalization Demographic shifts Social networks and mobility Data explosion53 © 2012 IBM Corporation

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