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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
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Thorsten SchröerDirector Electronics Industry Europe
+49 172 20 39 [email protected]
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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
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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
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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.
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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
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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
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85%of transactions trackable by retailer to an individual name
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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
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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
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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
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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
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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
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Source: IBM annual report 2013
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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
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� 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
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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
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Source: Philips annual report 2013
Product centric
No innovation
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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
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Repeat sale1-2 times per year
Sell hours of light in a stadium
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Case study Google/Nest – Programmable thermostat
IBM Confidential and Proprietary – Thorsten Schroeer, IBM Global Electronics Industry© Copyright IBM Corporation 2014 • All rights reserved
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$249 $25
10x price differentiation driven by software on the device and in the cloud.
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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
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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
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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
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FULL REPORT & MODEL NOW AVAILABLE ONLINE AND ON YOUR MOBILE DEVICE
T0 Traditional T0 Digital T1 Digital T2 Digital
$0
$50
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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
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How to get there?
1.
IBM Confidential and Proprietary – Thorsten Schroeer, IBM Global Electronics Industry© Copyright IBM Corporation 2014 • All rights reserved
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Begin to engage the end customer in a meaningful way(direct vs retail)
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How to get there?
2.
IBM Confidential and Proprietary – Thorsten Schroeer, IBM Global Electronics Industry© Copyright IBM Corporation 2014 • All rights reserved
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Figure out how your company fits into the emerging smarter home user experience.
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How to get there?
3.
IBM Confidential and Proprietary – Thorsten Schroeer, IBM Global Electronics Industry© Copyright IBM Corporation 2014 • All rights reserved
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Develop robust systems engineering to enable remote diagnostics, updates and control of appliances through
“smart devices” in the cloud
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How to get there?
4.
IBM Confidential and Proprietary – Thorsten Schroeer, IBM Global Electronics Industry© Copyright IBM Corporation 2014 • All rights reserved
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Ensure security to protect your brand.
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How to get there?
5.
IBM Confidential and Proprietary – Thorsten Schroeer, IBM Global Electronics Industry© Copyright IBM Corporation 2014 • All rights reserved
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Select proven partners with IoT breadth and depth.
.
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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
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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
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Cloud – Analytics – Mobile - Security
From strategy to execution
Global rollouts
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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
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Own data and generate new value
Be bold
Be disruptive
As premium brand go first
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Let’’’’s Stay In Touch
www.linkedin.com/in/thorstenschroeer
IBM Confidential and Proprietary – Thorsten Schroeer, IBM Global Electronics Industry© Copyright IBM Corporation 2014 • All rights reserved
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www.xing.com/profile/Thorsten_Schroeer
IBM Electronics www.ibm.com/electronics