The document discusses the transformation in B2B electronics markets, highlighting that while consumers are quickly adopting new technologies, enterprises lag behind due to several barriers. Key insights include the shifting focus from products to services, the impact of analytics and online marketplaces on procurement, and the winner-take-all nature of transformed markets. As traditional impediments to change decline, organizations must adapt by aligning closely with customer needs to remain competitive in this rapidly evolving landscape.

1. Sustaining Competitiveness Through
Business Model Transformation
Paul Brody
Global Industry Leader, Electronics
!

2. Consumers Lead Transformation, Enterprises Lag
Eroding Obstacles to B2B Transformation
Preparing for the Future
© 2012 IBM Corporation

3. Enterprises used to know how to do disruption.
Ad copy © Wang Laboratories. © 2012 IBM Corporation

4. Once upon a time, IBM disrupted Apple.
© 2012 IBM Corporation

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. The global leadership positions in the electronics industry
changed 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. The global leadership positions in the electronics industry
changed 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. Salesforce.com and Workday are great success stories, but the
market clearly doesn't believe Oracle and SAP are in danger
160!
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. 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 solutions
that can be connected to the analytics are applied to usage and versus discrete product, service
Internet and the proportion that performance data to predict sales
actually 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. Consumers Lead Transformation, Enterprises Lag
Eroding Obstacles to B2B Transformation
Preparing for the Future
© 2012 IBM Corporation

11. There are three critical barriers to the same rapid transformation in
the enterprise
Relationship based sales
Large, installed product base
Complex purchasing process & capital expense
© 2012 IBM Corporation

12. Relationships are between people, not enterprises.
And these days, the person is in charge.
© 2012 IBM Corporation

13. Analytics and online marketplaces are making procurement
relationships 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. Incremental replacement of the installed base no longer drives
demand and valuation
By 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 more
focused on maintenance of existing systems
Manufacturing
Chemicals
Petroleum
Utilities
Electronics
© 2012 IBM Corporation

15. Economics
of low
volume
production
are
changing
© 2012 IBM Corporation

16. The shift from products to services is radically simplifying the
buying decision and creating compelling ROI
Source: Photizo Group, MPS Advisory Service, MarketWatch™!
© 2012 IBM Corporation

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. Case Example: the entire market for printing services
transformed 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. The transition looks very similar to the that overtook the mobile
phone industry in it’s own transition to smart devices
In 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. 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. A shake-out in printing has been taking place for more than a decade
© 2012 IBM Corporation

22. Amidst all that destruction, a whole new ecosystem has risen up
to service the printing and imaging industry:
Ecosystem Growth and Technology Adoption, 2006, 2009, and 2012!
Professional
Number & 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. Consumers Lead Transformation, Enterprises Lag
Eroding Obstacles to B2B Transformation
Preparing for the Future
© 2012 IBM Corporation

24. Key Conclusions: Electronics markets that are undergoing B2B
transformation 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. Disruptive competitors have a history of re-framing the product and
objective, 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. For companies in B2B, the single strongest protection from
disruption is customer intimacy. How well do you know them?
The same piece …can be viewed from …with different
of 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 solution
CNC image, Flickr Creative Commons!
© 2012 IBM Corporation

27. When market transformation accelerates, organizations should drive
transformation outside in, starting with client-facing work
In B2B, leaders have often started with the
client-focused value proposition and then
aligned their organizations to support it • Started with the cost-per-page value
proposition!
• Still completing the transformation to
Sales a solutions and services organization
Service
SCM
• Created the Integrated Systems
R&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 of
Finance Global Services followed!
© 2012 IBM Corporation

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. Before the PC, before disruptions and the Internet and
everything, the IBM brand stood for one thing above all else
© 2012 IBM Corporation

30. Email • pbrody@us.ibm.com
Linked!In • Profile!:!hJp://www.linkedin.com/in/pbrody!
Reading!List • On!Delicious!:!hJp://www.delicious.com/prbrody!
• On!TwiJer:!#WorthReading
TwiJer!&!ADN • @pbrody!
Sina!Weibo • @pbrody!
!