service & software driven business model innovation for the electronics industry - a strategic...

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]

This presentation covers 4 topics

1The why, what and

how

2Examples of

Success

3How to get

started

4Final

Comments


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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.

The global market for electrical appliances is sizable, but still fragmented. Growth is driven by BRIC and a product centric mindset.


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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%


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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…


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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

What if one OEM finds the right disruptive model? – Learn from Mobile Phones!


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1The why, what and

how

2Examples of

Success

3How to get

started

4Final

Comments


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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.


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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


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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

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!


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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


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Repeat sale1-2 times per year

Sell hours of light in a stadium

Case study Google/Nest – Programmable thermostat


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$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.


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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

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


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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


1The why, what and

how

2Examples of

Success

3How to get

started

4Final

Comments


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How to get there?

1.


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Begin to engage the end customer in a meaningful way(direct vs retail)

How to get there?

2.


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Figure out how your company fits into the emerging smarter home user experience.

How to get there?

3.


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Develop robust systems engineering to enable remote diagnostics, updates and control of appliances through

“smart devices” in the cloud

How to get there?

4.


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Ensure security to protect your brand.

How to get there?

5.


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Select proven partners with IoT breadth and depth.

.


1The why, what and

how

2Examples of

Success

3How to get

started

4Final

Comments


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The Role of IBM

Strategic Advisor

Design – Build - Run

Cloud – Analytics – Mobile - Security


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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


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Own data and generate new value

Be bold

Be disruptive

As premium brand go first

Let’’’’s Stay In Touch

[email protected]

www.linkedin.com/in/thorstenschroeer


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www.xing.com/profile/Thorsten_Schroeer

IBM Electronics www.ibm.com/electronics