The High Tech industry is experiencing a shift away from discrete products, services and software to solutions. This deck gives examples from the industry, talks about the new business models, and shows how companies can be successful in these new models. It was presented at the High Tech Executive Value Network event in Palo Alto in Nov 2014. For this deck, I have shamelessly stolen both slides and ideas from my colleagues in the global Electronics industry in IBM (Paul Brody, Rami Ahola, Thorsten Schroeer, Tina Turczyn). Please feel free to do the same if it helps you.

1. © 2014 IBM Corporation
13 Nov 2014
Service Transformation in High Tech
Partha Bose

2. © 2014 IBM Corporation
Today’s Agenda
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Why Sell Services
Value from Services and Software - Examples
Service Business Models
How to get to a Solution Business Model

3. Even high end Consumer Electronics products are becoming
commodities
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Source: idealo

4. © 2014 IBM Corporation
Sales of Equipment Manufacturers are severely impacted by
business cycles
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Source: IDC Manufacturing Insights, 2013

5. Product Manufacturers have many reasons to sell Services &
Software
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Fight commoditization of
Fight commoditization of
products
products
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Note: Icons from the nounproject.com collection

6. © 2014 IBM Corporation
Customers also prefer the simpler and faster buying process
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Lower upfront capital
Lower upfront capital
expenditure
expenditure
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Note: Icons from the nounproject.com collection

7. © 2014 IBM Corporation
Today’s Agenda
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Why Sell Services
Value from Services and Software - Examples
Service Business Models
How to get to a Solution Business Model

8. © 2014 IBM Corporation
Consumer Electronics example – Programmable thermostat
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$249 $24.98
10x price differentiation driven by software on the device and in the cloud.

9. Medical Devices example – MRI hardware vs. imaging software
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Repeat sale in 7-10 years Repeat sale 1-2 times per year
Continuous revenue stream & customer engagement

10. Aerospace example – Selling engines vs. Selling Operating Hours
To selling Power by the
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From selling engines on
an one time basis
Hour
Rolls Royce now earns >50% of revenue from integrated services.

11. Semiconductor example – Software delivers better yielding chips
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Every foundry sells chips Winners sell better yield
Big Data drives competitive differentiation through improved yields.

12. Put software in a box and
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Software industry example – Move towards Appliances
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Instead of giving software
away for free
charge a premium
Customers likely to pay more for something tangible like an Appliance

13. © 2014 IBM Corporation
Today’s Agenda
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Why Sell Services
Value from Services and Software - Examples
Service Business Models
How to get to a Solution Business Model

14. Business Model Characteristics
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Service Business Models
• Warranty / Extended Warranty
• Maintenance agreements
• Training
• Product based Service
• Advanced Consulting services
• Engineering & IT services
• Standalone Service
• Bundled hardware, software,
services, financing
• Simple pricing – but based on
complex underlying analysis
• Sensors to monitor product
condition & usage
• Analytics to enhance uptime &
add to product value
• Frequent upgrades via software
• Solution Business Model
Note: Icons from the nounproject.14 com collection

15. © 2014 IBM Corporation
Today’s Agenda
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Why Sell Services
Value from Services and Software - Examples
Service Business Models
How to get to a Solution Business Model

16. 3 Steps to get to a Solution business model
DESIGN
Collaborate with partners and
customers to develop smarter
products and services.
DELIVER
Deploy the products and services
via appropriate revenue model and
fulfillment path.
MANAGE
Ensure ongoing value throughout
the product and service lifecycle.
© 2014 16 IBM Corporation

17. 1. Design
DESIGN
Collaborate with partners and
customers to develop smarter
products and services.
DELIVER
Deploy the products and services
via appropriate revenue model and
fulfillment path.
MANAGE
Ensure ongoing value throughout
the product and service lifecycle.
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Incorporate IoT (Internet of Things) & Analytics in the design of
Incorporate IoT (Internet of Things) & Analytics in the design of
service and asset management
service and asset management
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© 2014 17 IBM Corporation

18. 2. Deliver
DESIGN
Collaborate with partners and
customers to develop smarter
products and services.
DELIVER
Deploy the products and services
via appropriate revenue model and
fulfillment path.
MANAGE
Ensure ongoing value throughout
the product and service lifecycle.
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© 2014 18 IBM Corporation

19. 3. Manage
DESIGN
Collaborate with partners and
customers to develop smarter
products and services.
DELIVER
Deploy the products and services
via appropriate revenue model and
fulfillment path.
MANAGE
Ensure ongoing value throughout
the product and service lifecycle.
Use cross-functional teams, build a separate Service
Use cross-functional teams, build a separate Service
organization
organization
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Establish performance metrics - revenue sharing, sales metrics
Establish performance metrics - revenue sharing, sales metrics
(less compliance, more insight)
(less compliance, more insight)
© 2014 19 IBM Corporation

20. A business absolutely dedicated to service
will have only one worry about profits. They
will be embarrassingly large.
Henry Ford
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21. Email partha.bose@us.ibm.com
Phone +1 408 7917042
Twitter @pbose17
LinkedIn linkedin.com/in/parthabose
IBM Electronics Blog insights-on-business.com/electronics
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Let’s keep in touch
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