IBM SPJIMR ACPS 2011_Smarter Services

Editor's Notes

• #7: Let’s take a closer look at the environment enterprises of every size face today. Some of it can feel like relentless pressure, but in many instances, there’s a flip-side for growth and opportunity. Commoditization is factor for almost every industry, whether products or services Competition can today come from halfway around the world – and from companies that used to be partners, distributors, suppliers or from enterprises that were until recently in completely different channels and industries Just as competition can come from anywhere in the world, so can revenue, even for small companies. In fact, half of the exports from some of the world’s leading economies now go to emerging economies. Competition may come from unexpected sources, but nowadays so can new market opportunities – thanks to improved analysis, flexible distribution channels, and faster time to market capabilities. These opportunities are now available, in part, because of the increased integration of the world’s economies, societies, and information – but this same interrelated nature of the world means that when disasters and price fluctuations occur in part of the world, it can create effects almost immediately, almost anywhere. And, increasingly, alternative business models that can provide another industry player with competitive advantage have to be considered both a threat and an opportunity for an enterprise today -- depending on their flexibility and openness to change. In IBM’s recent global survey of CEOs, 87% predicted they needed to enact moderate to major change in their organizations in the next two years to address the pressures and opportunities before them. [Click on any of the categories on the left for more information about that item – OR – NEXT to advance presentation to demonstrate new capabilities available ]
• #8: For businesses and institutions everywhere, there have never been so many new possibilities at our disposal -- a whole new generation of tools, techniques and models has come of age: Innovation enablers that are more powerful, affordable and accessible than ever before. Consider just a few. Smart Objects : They’re so common, we almost take for granted how much smaller the components of computing have become and, at the same time, how much more powerful they are getting all the time. They’ve also become so low in cost, we can use them in almost everything. They’re so abundant, they’re almost disposable, which makes the decision to use these components even easier, even for throw-away purposes. Connectedness of Everything : Another capability that’s available today is the vast interconnected web of people and things. We already have a billion people online, and we’re approaching the point where we’ll have a trillion machines, devices, and other objects connected as well. Supercomputing for Everyone : Supercomputing is an area you would expect IBM to be talking about. But what’s really different today, however, is that you don’t need to be a big Fortune 500 company or a government to access the power of supercomputing. It’s now available to companies of every size, in every industry – even individuals. Information Put to Work : The amount of data that gets generated every day is just phenomenal. But it wasn’t until recently that we actually had the capability to make effective use of all that data. In fact, we’re quickly getting to a situation where enterprises are getting a handle on all their data and are very close to getting real business intelligence from it, thanks to new technology, advanced analytics and the mass adoption of standards. Just as networking standards made the Internet possible, so data and process standards in financial services, manufacturing, retail and virtually every other field are unlocking insights, answers — and revelations. Collaboration and Co-creation : New kinds of relationships in business are creating a new understanding of how intellectual capital can be created and managed in ways that’s very different from the old notions of idea creation and ownership. Marketplace for Expertise : We already know the importance of seeking economies of scale in growing a business. The next advance is going to be what might be considered “economies of expertise,” where the wide variety and availability of different kinds of skills and expertise can be accessed 24 hours a day, 7 days a week. Virtual Corporation : People use to talk about the virtual corporation about the same way they’d refer to the paperless office. And it was about as believable. But thanks to many of the capabilities mentioned here, it somehow went from hype to reality, almost overnight. [Click on any of the categories on the left for more information about that item – OR – NEXT to advance presentation to demonstrate different kinds of innovation]
• #9: All the capabilities we’ve just mentioned are the elements that enable innovation. But applying them is not, by itself, innovation. Innovation comes when you take those elements, integrate them with your products, your operations and your corporate culture. You combine them in a new ways with some new thinking about why you’re in business and what you have to offer your customers, and then you can start to tackle the things shown here on the left. We’ll walk through each of those. On the right, you can see how CEOs responded in IBM’s most recent global study. Who’s responsible for implementing innovation in the company? Over a third of the CEOs say they and their direct teams are. Others spread the responsibility around, and more than a quarter of CEOs admit that there really isn’t anyone driving an innovation agenda for their organizations. There isn’t necessarily a right answer here, though it obviously requires a commitment and a focus from corporate leaders, or else it just won’t happen. But it can’t just be another top-down initiative like “quality” and “excellence” and such things we’ve seen before. That’s because innovation requires collaboration, it requires openness and a willingness to “let go to grow.” In other words, every part of the company has a part to play if an enterprise is to be an innovation organization. And it’s only with a cross-company focus that you’re able to innovate the following ways... [NEXT to discuss innovation in products]
• #12: The amount of effort and expense put into innovation. Product-dominated firms spend the vast majority of their innovation efforts on Product Performance and associated components (the Product System). These two types of innovation alone represent nearly 80% of the total innovation level of effort for tangible goods. Peer Insight’s analysis of 100 service innovation projects reveals a much more even distribution of effort. No single type of innovation is off the chart the way Product Performance is for tangible products (gap A). The more even distribution of effort for service innovations is rooted in the very nature of services: they are intangible. For this reason, consumers of services need more cues to judge quality than when they are consuming goods. We are going to examine Innovation efforts in service businesses and look at a few case studies. For example, in the U.S., a person may get tax advice in a Wal-Mart or from a $500/hour tax attorney. To judge the quality of tax advice, therefore, we may need to think about price, timeliness, the use of outside experts, how professional the receptionist was, the conference room we sat in, and who referred them to us. These considerations are rooted in Business Model (price), Core Process (timeliness), Networking (outside experts), Customer Service (receptionist), Customer Experience (conference room), and Brand (referral). The example above may explain why service innovations devote more effort to the overall Customer Experience (gap B) than any other type of innovation. The second most common focus for service innovation is Core Process (gap C) because that is where the IT systems and service fulfillment processes are developed. IT can be thought of as the services “ factory”, since robust IT systems can make complex customer experiences less expensive and more reliable. Finally, services are far more likely than goods to innovate the Business Model (gap D). In the goods-era, the Channels, Business Models, and Value Networks were relatively fixed. But services environments are highly fluid, and the rise of the Internet has made distribution of information based services essentially free, enabling a number of new potential business models.
• #27: From our framework, we found three types, or paths to business model innovation. Industry innovators may move into a new industry (Virgin), redefine an existing one (Dell) or create an entirely new value chain (iPod/iTune) Revenue innovators develop new value propositions (Cirque du Soleil) and pricing models (Gillette) Enterprise innovators may become more integrated in their operations (Zara), or they may become more specialized by focusing on core functions and partnering for the others (Bharti). They also may fundamentally change the way they collaborate with partners. (P&G) We’ll explain each more thoroughly, but first let’s look at financial results of various approaches
• #28: Next, there’s the work that goes into defining a company’s current and target positions so a path can be created Assessments related to industry model innovation tackle these questions How can you leverage new / emerging business models in your industries? From other industries? How does new/emerging technology change the parameters? Are you a leader of follower when it comes to industry change? Revenue model questions Are there ways to reconfigure / re-allocated sources of revenue in your business? How can you sell elements of your services / offerings differently? How can you reconfigure value elements in your business? Enterprise model questions How can you select and leverage unique assets & capabilities in your business that provide competitive differentiation? What should you do yourself vs where should you partner for optimal value? A path is created by assessing answers in relation to most effective degree and timing of innovations.