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Service & Software driven business model innovation for the electronics industry - a strategic viewpoint
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August 2014
Service and Software driven Business Model Innovation
for the Electronics Industry
Industry Disruption and Transformation for Growth
IBM Confidential and Proprietary – Thorsten Schroeer, IBM Global Electronics Industry© Copyright IBM Corporation 2014 • All rights reserved
Page - 1
Thorsten SchröerDirector Electronics Industry Europe
+49 172 20 39 057thorsten.schroeer@de.ibm.com
This presentation covers 4 topics
1The why, what and
how
2Examples of
Success
3How to get
started
4Final
Comments
IBM Confidential and Proprietary – Thorsten Schroeer, IBM Global Electronics Industry© Copyright IBM Corporation 2014 • All rights reserved
Page - 2
Semiconductor Suppliers & Mfg
Services
Power & Automation Equipment
Office Products & Computers
Medical Devices
Examples: AMD, AMAT, EMC, Flextronics, Intel, Murata, Nat. Semi, NEC, Renesas, Solectron, ST Micro, TDK, TI, TSMC
Examples: ABB, Toshiba, Schneider, Rockwell, GE-Fanuc, Siemens, Cooper, Eaton Electric, Emerson, Invensys, SMA Solar
Examples: ADC, Alcatel, Avaya, Cisco, Ericsson,Lucent, NEC, Nokia, Motorola, Nortel Networks, Sanyo, Sharp, Tellabs
Examples: Eastman Kodak, Guidant, Medtronic, Moeller, Olympus, Omron, St. Jude Medical, Zeiss
Examples: Apple, Casio, Electrolux, Fuji Film, Kodak, LG, Miele, BSH Nintendo, Sanyo, Sharp, Thomson, Whirlpool
Examples: Apple, Canon, Dell, Epson, Fuji-Xerox, HP, Konica Minolta, Kyocera, Lenovo, NEC, Ricoh, Sharp,
Xerox
Consumer Electronics & Appliances
Network Equipment Providers
The electronics industry has a very different maturity level within the different electronics sub segments when it comes to product to service integration.
IBM Confidential and Proprietary – Thorsten Schroeer for the Electronics Centre of Competence© Copyright IBM Corporation 2013 • All rights reserved
Page - 33
Micro, TDK, TI, TSMC Invensys, SMA Solar Sanyo, Sharp, Tellabs Thomson, WhirlpoolXerox
� Semicon developed fabless business models with design services without any product manufacturing
� Power & Automation Equipment players are at an early stage integrating products with remote preventive maintenance
� Medical device manufacturer working on highly innovative solutions for personal care
� End Consumer Electronics leading the race with well developed integration of products and service e.g. Apple, Xerox and others.
� Whitegoods OEM’s are still in early stage trying to find value from services and software.
The global market for electrical appliances is sizable, but still fragmented. Growth is driven by BRIC and a product centric mindset.
IBM Confidential and Proprietary – Thorsten Schroeer, IBM Global Electronics Industry© Copyright IBM Corporation 2014 • All rights reserved
Page - 4
Retailers are friends and enemies at the same time....what is the future of the classical retail/wholesale value chain?
85%
IBM Confidential and Proprietary – Thorsten Schroeer, IBM Global Electronics Industry© Copyright IBM Corporation 2014 • All rights reserved
Page - 5
85%of transactions trackable by retailer to an individual name
In summary, there are many reasons why companies are adding services and software to their offering portfolio in order to drive industry disruption.
System Cost
Installation
Total System Cost – Hardware Focused� End to end solution with improved customer
loyalty
� Higher margins in a less commoditized
…and provide other significant benefits to the vendor:
Solutions shift the value equation away from hardware…
IBM Confidential and Proprietary – Thorsten Schroeer for the Electronics Centre of Competence© Copyright IBM Corporation 2013 • All rights reserved
Page - 6
6
Service
Spares
System Cost
InstallationServiceSpares
Total System Cost – Product as a Service
Operating Cost
� Higher margins in a less commoditized
portfolio
� Usage based pricing for long lasting and
predictable revenue flow with faster buying
decisions
� Analytics information capture with new
opportunities for value add
What if one OEM finds the right disruptive model? – Learn from Mobile Phones!
IBM Confidential and Proprietary – Thorsten Schroeer, IBM Global Electronics Industry© Copyright IBM Corporation 2014 • All rights reserved
Page - 77
This presentation covers 4 topics
1The why, what and
how
2Examples of
Success
3How to get
started
4Final
Comments
IBM Confidential and Proprietary – Thorsten Schroeer, IBM Global Electronics Industry© Copyright IBM Corporation 2014 • All rights reserved
Page - 8
Case Study IBM: Segment shift from hardware to services and software builds foundation for IBM’s business success since late 1990s.
IBM Confidential and Proprietary – Thorsten Schroeer for the Electronics Centre of Competence© Copyright IBM Corporation 2013 • All rights reserved
Page - 99
Source: IBM annual report 2013
Case Study Xerox: Printing & Copying has been of the first and most thoroughly transformed B2B segments in just 3 years from 2008-2011
� From Product
– Printer
– Toner
– Service
� To Managed Print Services
56%
58%
50%
75%
Managed Print Services Huge Growth
(Represented by the Number of MPS programs announced)
# New MPS Programs
'04 - 1
'05 - 1
11
2
IBM Confidential and Proprietary – Thorsten Schroeer, IBM Global Electronics Industry© Copyright IBM Corporation 2014 • All rights reserved
Page - 1010
� To Managed Print Services– Price per page– Everything included– Apps & analytics delivered
in cloud
1% 2% 3% 4%
14%
45%
0%
25%
50%
2004 2005 2006 2007 2008 2009 2010 2011
MPS program growth
'05 - 1
'06 - 1
'07 - 1
'08 - 10
'09 - 31
'10 - 11
'11 - 2
1
10
31
11
1
Case Study Philips: Accelerate! Business Model Innovation on Service and Software plays vital role in global transformation program to revitalize the Philips brand.
-50% rev. in 10 years
Accelerate!
IBM Confidential and Proprietary – Thorsten Schroeer, IBM Global Electronics Industry© Copyright IBM Corporation 2014 • All rights reserved
Page - 11
Source: Philips annual report 2013
Product centric
No innovation
Case Study Philips: Software and Managed Services gain share and margin
MRI hardware vs imaging software
Repeat sale in 7-10 years
Sell light bumps vs sell light
One time product only sell
- competitive
IBM Confidential and Proprietary – Thorsten Schroeer for the Electronics Centre of Competence© Copyright IBM Corporation 2013 • All rights reserved
Page - 1212
Repeat sale1-2 times per year
Sell hours of light in a stadium
Case study Google/Nest – Programmable thermostat
IBM Confidential and Proprietary – Thorsten Schroeer, IBM Global Electronics Industry© Copyright IBM Corporation 2014 • All rights reserved
Page - 1313
$249 $25
10x price differentiation driven by software on the device and in the cloud.
Rolls Royce shifted to a Smarter Product Platform Rolls Royce quickly went from “Out of Business” to #2 in the jet engine market
Platform
Service
Global Backlog Market Share, Commercial Jet Engines
Case Study Rolls Royce: Integrated solutions & services business model with pay by the hour of operation.
IBM Confidential and Proprietary – Thorsten Schroeer for the Electronics Centre of Competence© Copyright IBM Corporation 2013 • All rights reserved
Page - 1414
Technology + Business Model Change
� Shifted to a platform model with more complexity in parts, but addresses a broader market
� Sell operating hours not one time product purchase� Shifted business model from Razor & Blades to total solution of
device integrated with service� Uses remote management, monitoring & analytics to enable the
business model shift
Analytics
Sources: IBM Research
Backlog Share – New Major Wide body Aircraft
� RR now earn more than 50% of their revenue from integrated services compared to 15% in the 1990s
58% of the total product value of a washing machine will be 3D Printable in ten years – impact service business!!!
$100
$150
$200
$250
$300
$350
$400$368 $368
$336
$243
Washing Machine Unit Manufacturing Cost Curve
IBM Confidential and Proprietary – Thorsten Schroeer, IBM Global Electronics Industry© Copyright IBM Corporation 2014 • All rights reserved
Page - 15
FULL REPORT & MODEL NOW AVAILABLE ONLINE AND ON YOUR MOBILE DEVICE
T0 Traditional T0 Digital T1 Digital T2 Digital
$0
$50
This presentation covers 4 topics
1The why, what and
how
2Examples of
Success
3How to get
started
4Final
Comments
IBM Confidential and Proprietary – Thorsten Schroeer, IBM Global Electronics Industry© Copyright IBM Corporation 2014 • All rights reserved
Page - 16
How to get there?
1.
IBM Confidential and Proprietary – Thorsten Schroeer, IBM Global Electronics Industry© Copyright IBM Corporation 2014 • All rights reserved
Page - 17
Begin to engage the end customer in a meaningful way(direct vs retail)
How to get there?
2.
IBM Confidential and Proprietary – Thorsten Schroeer, IBM Global Electronics Industry© Copyright IBM Corporation 2014 • All rights reserved
Page - 18
Figure out how your company fits into the emerging smarter home user experience.
How to get there?
3.
IBM Confidential and Proprietary – Thorsten Schroeer, IBM Global Electronics Industry© Copyright IBM Corporation 2014 • All rights reserved
Page - 19
Develop robust systems engineering to enable remote diagnostics, updates and control of appliances through
“smart devices” in the cloud
How to get there?
4.
IBM Confidential and Proprietary – Thorsten Schroeer, IBM Global Electronics Industry© Copyright IBM Corporation 2014 • All rights reserved
Page - 20
Ensure security to protect your brand.
How to get there?
5.
IBM Confidential and Proprietary – Thorsten Schroeer, IBM Global Electronics Industry© Copyright IBM Corporation 2014 • All rights reserved
Page - 21
Select proven partners with IoT breadth and depth.
.
This presentation covers 4 topics
1The why, what and
how
2Examples of
Success
3How to get
started
4Final
Comments
IBM Confidential and Proprietary – Thorsten Schroeer, IBM Global Electronics Industry© Copyright IBM Corporation 2014 • All rights reserved
Page - 22
The Role of IBM
Strategic Advisor
Design – Build - Run
Cloud – Analytics – Mobile - Security
IBM Confidential and Proprietary – Thorsten Schroeer, IBM Global Electronics Industry© Copyright IBM Corporation 2014 • All rights reserved
Page - 23
Cloud – Analytics – Mobile - Security
From strategy to execution
Global rollouts
From Product to Services/Software - final considerations
Talk to your end customers – they want to talk to you
Understand value of software/services and sell it
Own data and generate new value
IBM Confidential and Proprietary – Thorsten Schroeer, IBM Global Electronics Industry© Copyright IBM Corporation 2014 • All rights reserved
Page - 24
Own data and generate new value
Be bold
Be disruptive
As premium brand go first
Let’’’’s Stay In Touch
thorsten.schroeer@de.ibm.com
www.linkedin.com/in/thorstenschroeer
IBM Confidential and Proprietary – Thorsten Schroeer, IBM Global Electronics Industry© Copyright IBM Corporation 2014 • All rights reserved
Page - 25
www.xing.com/profile/Thorsten_Schroeer
IBM Electronics www.ibm.com/electronics
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