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IBM Global CEO Study The Enterprise of the Future

IBM Global CEO Study The Enterprise of the Future. Kirill Korniliev, CGM IBM EE/A September 1 st 2008. 2006 Innovation. 2008 The Enterprise of the Future. Key Findings.

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IBM Global CEO Study The Enterprise of the Future

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  1. IBM Global CEO StudyThe Enterprise of the Future Kirill Korniliev, CGM IBM EE/A September 1st 2008

  2. 2006 Innovation 2008The Enterprise of the Future Key Findings • A new cycle is launched with key findings on changes in the value chain -- from customers to global integration -- and the business model innovation necessary to respond • Business model innovation matters • External collaboration is indispensable • Innovation must be orchestrated from the top 765 personal CEO interviews 1130 personal CEO interviews The new edition the IBM Global CEO Study builds on the strong momentum created by IBM’s premier business research 2004 Your turn! Key Findings • Revenue growth is the number one priority • Responsiveness is a new key competence • Improving internal capabilities is a first step toward growth 456 personal CEO interviews Global CEO Study 2008 | May 2008

  3. ANALYSIS • Quantitative and Qualitative • Current behavior • Investment patterns • Future intent • Choices of financial outperformers • Case studies of excelling organizations • SCOPE & APPROACH • 1130 CEOs and Public Sector Leaders • One-hour interviews • 78% Private, 22% Public Sector • 32 Industries • 33% Asia, 36% EMEA, 31% Americas • 80% Established, 20% Emerging Economies We spoke to 1,130 CEOs and conducted in-depth analysis to determine the characteristics of the Enterprise of the Future How are organizations addressing: • New and changing customers – changes at the end of the value chain • Global integration – changes within the value chain • Business model innovation – their response to these changes Scope Approach Global CEO Study 2008 | May 2008

  4. 1 2 3 4 5 Hungry for change Innovative beyond customer imagination Globally integrated Disruptive by nature Genuine, not just generous The Enterprise of the Future is … Global CEO Study 2008 | May 2008

  5. The Enterprise of the Future is …Hungry for Change

  6. CEOs see change coming from everywhere External Forces Impacting the Organization Market factors People skills Macroeconomic factors Globalization Regulatory concerns Technological factors Socioeconomic factors Environmental factors Geopolitical factors Market factors People skills Technological factors 84% 67% 48% 42% 44% 48% 41% 35% Globalization Regulatory concerns Macroeconomic factors Environmental factors Socioeconomic factors Geopolitical factors 33% 2008 2004 2006 Source: IBM Global CEO Study 2008; n (2004) = 403, n (2006) = 760, n (2008) = 1130 Global CEO Study 2008 | May 2008

  7. 22 8 % % CHANGE GAP* CHANGE GAP* Change Needed Past Change Success No/limited Change Moderate Change Substantial Change No/limited Success Moderate Success Successful The “change gap” triples in just two years More CEOs than ever before – 8 in 10 – anticipate turbulent change, and plan bold moves in response 2006 2008 • In two years the gap between the ability to manage change and the challenge ahead has tripled • The number of companies reporting limited or no success has surged 60% 6% 19% 13% 12% 11% 31% 22% 83% 20% 65% 61% 57% * Difference or ‘gap’ between expected level of change needed and past success in managing change Source: IBM Global CEO Study 2008; n (2006) = 709, n (2008) = 1104 Global CEO Study 2008 | May 2008

  8. CHANGE GAP* CHANGE GAP* 29 19 % % Past Change Success No/limited Success Moderate Success Successful Change Needed No/limited Change Moderate Change Substantial Change Managing change becomes a core capability Companies capable of successfully managing change are hungry for change to push their competitive advantage Underperformers** Outperformers** 4% 5% 24% 17% 13% 10% • Outperforming organizations are significantly better than their peers at successfully navigating change 85% 17% 83% 22% 66% 54% * Difference or ‘gap’ between expected level of change needed and past success in managing change ** Performance based on industry comparisons within survey sample of revenue CAGR 2003 to 2006 Source: IBM Global CEO Study 2008; n (underperformers) = 173, n (outperformers) = 164 Global CEO Study 2008 | May 2008

  9. “The rate of change has increased dramatically. Customers are demanding radical change in product innovation. Our company will need to greatly increase its capabilities to deal with these demands.” Dennis Jönsson, CEO, Tetra Pak Global CEO Study 2008 | May 2008

  10. The Enterprise of the Future is …Innovative Beyond Customer Imagination

  11. INCREASE 19 % Companies go after new customers in new markets Rise of purchasing power in rapidly developing economies and prosperity in Western economies Impact Investment* 27.5% 23.2% Source: IBM Global CEO Study 2008, n = 609; * Total investments: all asset investments + all investments in R&D, marketing and sales Global CEO Study 2008 | May 2008

  12. CEOs see more potential in a new class of customer Rise of the Informed and Collaborative Customer: The Information Omnivore Impact “In the future, we will be talking more and more about the ‘prosumer’— a consumer/producer who is even more extensively integrated into the value chain. As a consequence, production processes will be customized more precisely and individually.” Hartmut Jenner, CEO, Alfred Kärcher GmbH Source: IBM Global CEO Study 2008, n = 609 Global CEO Study 2008 | May 2008

  13. To regain its leadership position, Nintendo leveraged the loyalty and expertise of its core customer segment Established online community of experienced and loyal gamers called “Sages” Offering incentives in return for customer information and community contributions Gaining valuable insights into market needs and preferences Nintendo successfully connected with two new customer groups New customer groups included women and older men Influencing everything from game offerings to new product design Regaining market leadership with 44% market share after a low of 22% in the mid-2000s Nintendo is well-positioned for the future – an organization innovative beyond customer imagination Nintendo: Building market share through customer collaboration Global CEO Study 2008 | May 2008

  14. The Enterprise of the Future is …Globally Integrated

  15. 3 0 3 Actively enter new markets Defend your core 43% 20% 37% 75 85 86 %* 3 0 3 Deeply change mix of capabilities, knowledge and assets Maintain current mix 57% 11% 32% %* 3 0 3 Do everything in-house Partner extensively 55% 10% 35% %* CEOs push ahead to capitalize on global integration The vast majority of CEOs aggressively move toward global integration – and radically reconfigure business designs • 75% actively enter new markets in pursuit of new customers and scarce talent • 86% plan fundamental changes in capabilities that distinguish leading organizations – knowledge and asset mix • 85% of CEOs plan to partner to globally integrate – more than half plan to do so extensively Source: IBM Global CEO Study 2008, n = 872, n=860, n=880 * total % of CEOs who answered between left hand side 3 to 0 (0 = both sides equally important) Global CEO Study 2008 | May 2008

  16. CEOs recalibrate their businesses Equally Important Maintain current mix of capabilities, knowledge and assets Deeply change mix 32% Partner extensively Do everything in-house 35% Actively enter new markets Defend your core 37% Globalize brands/products Localize brands/products 33% Optimize operations globally Optimize operations locally 32% Grow through mergers & acquisitions Grow organically 50% Drive multiple cultures Strive for one culture 34% Source: IBM Global CEO Study 2008; private sector responses Global CEO Study 2008 | May 2008

  17. Four archetypes emerge as the predominant design Cluster analysis reveals global integration approaches Actively enter new markets Defend your core Deeply change mix of capabilities, knowledge and assets Maintain current mix of capabilities, knowledge and assets Partner extensively Do everything in-house Globalize brands/products Localize brands/products Optimize operations globally Optimize operations locally Grow through mergers & acquisitions Grow organically Strive for one culture Drive multiple cultures Extensive Globalizers (n=230, 31%) Globalizers (n=246, 33%) Blended Thinkers (n=131, 17%) Localizers (n=140, 19%) Source: IBM Global CEO Study 2008 Global CEO Study 2008 | May 2008

  18. 64 71 % % Outperformers opt for globalized business designs Two-thirds of firms choose a globally integrated business design All Companies Outperforming* Companies Source: IBM Global CEO Study 2008; n = 200; * Performance based on industry comparisons within survey sample of absolute profit margin (average of 2003 and 2006) Global CEO Study 2008 | May 2008

  19. “A few years ago, we were a national company; now we’re a global company. Our integrated supply chain must adapt to meet demand in 50 countries. We’re going to have to bring people in from the outside.” Jim Guyette, President and CEO, Rolls-Royce North America Global CEO Study 2008 | May 2008

  20. The Enterprise of the Future is …Disruptive by Nature

  21. Business model transformation erupts • More than 2 in 5 pursue business models that are more externally collaborative • More than 1 in 5 pursue an even more disruptive path: redefining their markets, moving into or creating wholly new industries Business Model Innovation Focus More than two-thirds of CEOs strongly focus on the most sustainable form of innovation – business model transformation Multiple BMI Types 20% Enterprise Model Innovation 39% Industry Model Innovation 18% Revenue Model Innovation 23% Source: IBM Global CEO Study 2008; n = 1106 Global CEO Study 2008 | May 2008

  22. Outperformers make the boldest moves Business Model Innovation Focus More outperformers (28%) choose the most difficult transformation - disrupting industries - and more (49%) choose collaborative business models 36% 22% 28% 20% 49% 44% “For us, enterprise model innovation is primarily about having the right business model to enter other markets and secure new capabilities.” Andrew Brandler, CEO, CLP Holdings Limited Source: IBM Global CEO Study 2008; * Performance based on industry comparisons within survey sample of absolute profit margin (average of 2003 and 2006) n (underperformers) =120, n (outperformers) =109 Global CEO Study 2008 | May 2008

  23. The Enterprise of the Future is …Genuine, not just Generous

  24. CEOs positive about customers’ CSR expectations CEOs view of increasing customer expectations of CSR • Since 2004 three forces of change consistently rose on CEOs’ agendas; all are linked to corporate social responsibility (CSR) • CSR-focused CEOs put developing new products and services at the top of their agenda Faced with rising customer expectations of corporate social responsibility, more than two-thirds take a positive view, and plan to innovate Negative impact 12% No impact 20% Positive impact 68% “The consumers’ concept of quality will no longer be measured by only the physical attributes of a product – it will extend to the process of how the product is made, including product safety, environmental and social responsibility compliance.” Victor Fung, Chairman, Li & Fung Global CEO Study 2008 | May 2008

  25. 25 % INCREASE Organizations profit – and prosper – by doing good Investment* CEOs plan their largest increase in customer investment to meet their CSR expectations 13.4% 10.7% “Our company is investing extensively in corporate social responsibility. We need to be a reference in this domain. As the leader of the luxury industry, we have to stay ahead.” Yves Carcelle, Chairman and CEO, Louis Vuitton Source: IBM Global CEO Study 2008, n = 609; * Total investments: all asset investments + all investments in R&D, marketing and sales Global CEO Study 2008 | May 2008

  26. To meet growing corporate social responsibility expectations, British retailer Marks & Spencer (M&S) has embarked on a £200-million, five-year plan Impacting almost every aspect of its operations M&S established online supplier exchange Connecting the thousands of factories, farms and fisheries that supply its products To simultaneously improve efficiency and sustainability Engaging customers in solving issues (e.g., giving shopper bags “for life”) M&S has proven it is possible to do well while doing good Operating profit CAGR of over 14% over past five years Marks & Spencer is well-positioned for the future – an organization genuine, not just generous Marks & Spencer: Serious about social responsibility Global CEO Study 2008 | May 2008

  27. The Enterprise of the FuturePositioning for Your Future

  28. HUNGRY FOR CHANGE Ad hoc and reactive change Project driven change Change portfolio and program Anticipating and proactive change Change becomes the strategy INNOVATIVE BEYOND CUSTOMER IMAGINATION Customer intelligence Customer information transparency Two-way customer interaction Customer collaborative development Expanding customer aspirations GLOBALLYINTEGRATED Exploring global opportunities Driving specific global initiatives Building global capabilities systematically Global centers of excellence Global enterprise innovation DISRUPTIVE BY NATURE Exploring Business Model Innovation opportunities Experimenting with BMI Implementing BMI initiatives Multiple BMI strategies Radical and pervasive BMI GENUINE, NOT JUST GENEROUS Regulatory compliance Strategic philanthropy Values based self-regulation Efficiency through CSR CSR as growth platform Are you building your Enterprise of the Future? Building the Enterprise of the Future Global CEO Study 2008 | May 2008

  29. CEO Roundtable, Moscow, June 24 2008 • “Enterprise of the Future” roundtable event for business leaders, media and academia to present and discuss the findings of the IBM Global CEO Study. • Event attended by 16 CEOs and other board-level leaders from Russian and international companies including: • Sberbank • Mirax Group • IKEA • VTB 24 • RussNeft • Nornikel • ABB • Russian Stanard Bank • Per Kaufmann, CEO, IKEA Russia & CIS and Dmitry Tarasov, Sberbank, Director for Strategic Planning talked about their own business models and strategies for entering new markets. Global CEO Study 2008 | May 2008

  30. CEO Roundtable in Moscow– leaderstalk «At Sberbank we are constantly adding new products and services to our business in order to stay competitive. Our customers are increasingly demanding and they сontinuously test our business model because if they do not get what they are looking for from us, they will switch to a competitor» (Dmitry Tarasov, Sberbank, Director for Strategic Planning) «IKEA's global strategy is to be a bit of affordable glitter in people's lives - it is essential that we maintain this as we expand into new markets. One of the things we need to improve is our affordability in the emerging markets, like Russia. We need to develop a clear strategy for markets where the average consumer does not have much money to spend» (Per Kaufmann, CEO, IKEA Russia & CIS) Global CEO Study 2008 | May 2008

  31. For more information • For all study materials and book orders check out: • www.ibm.com/enterpriseofthefuture • w3.ibm.com/services/gbs/ceo_study_2008.html Global CEO Study 2008 | May 2008

  32. IBM Global CEO StudyThe Enterprise of the Future Kirill Korniliev, CGM IBM EE/A September 1st 2008

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