© Copyright IBM Corporation 2008 IBM Global Business Services IBM Global CEO Study The Enterprise...

© Copyright IBM Corporation 2008

IBM Global Business Services

IBM Global CEO Study

The Enterprise of the Future

Kirill Korniliev, CGM IBM EE/A

September 1st 2008

Global CEO Study 2008 | May 2008 2 © Copyright IBM Corporation 2008

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 765 personal CEO interviews

2006

Innovation

Key Findings Business model innovation

matters External collaboration is

indispensable Innovation must be

orchestrated from the top

2008The Enterprise of the Future

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

1130 personal CEO interviews


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

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


The Enterprise of the Future is …

Globally integrated

3Hungry for change

1Disruptive by nature

4Genuine, not just generous

5Innovative beyond customer imagination

2




Hungry for Change


2004 2006 2008

Market factors

People skills

Macroeconomic factors

Globalization

Regulatory concerns

Technological factors

Socioeconomic factors

Environmental factors

Geopolitical factors

84% 67%

42%

33%

44%

41%

48%

48%

35%

CEOs see change coming from everywhere

External Forces Impacting the Organization

Source: IBM Global CEO Study 2008; n (2004) = 403, n (2006) = 760, n (2008) = 1130

Market factors

People skills

Technological factors

Globalization

Regulatory concerns

Macroeconomic factors

Environmental factors

Socioeconomic factors

Geopolitical factors


The “change gap” triples in just two years

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%

More CEOs than ever before – 8 in 10 – anticipate turbulent change, and plan bold moves in response

Source: IBM Global CEO Study 2008; n (2006) = 709, n (2008) = 1104

ChangeNeeded

Past ChangeSuccess

* Difference or ‘gap’ between expected level of change needed and past success in managing change

ChangeNeeded

Past ChangeSuccess

2006 2008

Change NeededNo/limited Change

Moderate Change

Substantial Change

No/limited Success

Moderate Success

Successful

Past Change Success

22%CHANGE GAP*8%

CHANGE GAP*

6%11%

83%

19%

20%

61%

13%

22%

65%

12%

31%

57%


Managing change becomes a core capability

* Difference or ‘gap’ between expected level of change needed and past success in managing change

Source: IBM Global CEO Study 2008; n (underperformers) = 173, n (outperformers) = 164** Performance based on industry comparisons within survey

sample of revenue CAGR 2003 to 2006

Change NeededNo/limited Change

Moderate Change

Substantial Change

No/limited Success

Moderate Success

Successful

Past Change Success

Outperformers**Underperformers**

19%CHANGE GAP*

Change Needed Past ChangeSuccess

Change Needed Past ChangeSuccess

29%CHANGE GAP*

5%10%

85%

17%

17%

66%

4%

13%

83%

24%

22%

54%

Companies capable of successfully managing change are hungry for change to push their competitive advantage

Outperforming organizations are significantly better than their peers at successfully navigating change


“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




Innovative Beyond Customer Imagination


No impact 19%

Positive impact 67%

Negative impact 14%

Companies go after new customers in new markets

Investment* past 3years

Investment* next 3years

Source: IBM Global CEO Study 2008, n = 609; * Total investments: all asset investments + all investments in R&D, marketing and sales

Rise of purchasing power in rapidly developing economies and prosperity in Western economies

19%INCREASE

23.2%

27.5%

Impact Investment*


CEOs see more potential in a new class of customer

Source: IBM Global CEO Study 2008, n = 609

No impact 14%

Positive impact 76%

Negative impact 10%

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

Rise of the Informed and Collaborative Customer: The Information Omnivore


Nintendo is well-positioned for the future – an organization innovative beyond customer imagination

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: Building market share through customer collaboration




Globally Integrated


CEOs push ahead to capitalize on global integration

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

* total % of CEOs who answered between left hand side 3 to 0 (0 = both sides equally important)Source: IBM Global CEO Study 2008, n = 872, n=860, n=880

37%Defend your core

Actively enter new markets 37%

3 0 3

75 %*

20%43%

32%

3 0 3

86

Deeply changemix of capabilities,

knowledge and assets

Maintain current mix

%*

32% 11%57%

35%Partner

extensively

Do everything in-house

3 0 3

85%*

35% 10%55%

The vast majority of CEOs aggressively move toward global integration – and radically reconfigure business designs


CEOs recalibrate their businesses

57%

55%

43%

40%

39%

24%

30%

32%

35%

37%

33%

32%

50%

34%

10%

11%

20%

27%

29%

26%

36%

Partner extensively

Globalize brands/products

Drive multiple cultures

Optimize operations globally

Deeply change mix

Grow through mergers & acquisitions


Localize brands/products

Strive for one culture

Optimize operations locally

Grow organically

32%

35%

33%

32%

50%

34%

Defend your coreActively enter new markets 37%

Maintain current mix of capabilities, knowledge and assets

Source: IBM Global CEO Study 2008; private sector responses

Equally Important


Four archetypes emerge as the predominant design

Source: IBM Global CEO Study 2008

Cluster analysis reveals global integration approaches

Drive multiple cultures

Grow organically

Strive for one culture

Localize brands/products


Defend your core

Partner extensively

Globalize brands/products

Optimize operations globally

Deeply change mix of capabilities, knowledge and assets

Grow through mergers & acquisitions

Optimize operations locally

Maintain current mix of capabilities, knowledge and assets

Actively enter new markets

Extensive Globalizers (n=230, 31%)

Globalizers (n=246, 33%)

Blended Thinkers (n=131, 17%)

Localizers (n=140, 19%)


Outperformers opt for globalized business designs

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)

Blended Thinkers

17%

Extensive Globalizers

31%

Globalizers 33%

Localizers 19%

Blended Thinkers

12%

Extensive Globalizers

32%

Globalizers 39%

Localizers 17%

All Companies Outperforming* Companies

64% 71%

Two-thirds of firms choose a globally integrated business design


“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




Disruptive by Nature


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

More than two-thirds of CEOs strongly focus on the most sustainable form of innovation – business model transformation

Business Model Innovation Focus

Source: IBM Global CEO Study 2008; n = 1106

29%

2%

69%

Limited/NoBMI Focus

Moderate BMIFocus

Strong BMIFocus

Multiple BMITypes 20%

Industry ModelInnovation 18%

Enterprise Model Innovation 39%

Revenue ModelInnovation 23%


Outperformers make the boldest moves

Underperformers* Outperformers*

Revenue ModelInnovation

Industry ModelInnovation

Enterprise ModelInnovation

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

“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

22%

28%

49%

36%

44%

20%

Business Model Innovation Focus More outperformers (28%) choose the most difficult transformation - disrupting industries - and more (49%) choose collaborative business models




Genuine, not just Generous


CEOs positive about customers’ CSR expectations

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

CEOs view of increasing customer expectations of CSR

“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

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%


Organizations profit – and prosper – by doing good

Investment past 3years

Investment next 3years

25%INCREASE

10.7%13.4%

Source: IBM Global CEO Study 2008, n = 609; * Total investments: all asset investments + all investments in R&D, marketing and sales

Investment*

“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

CEOs plan their largest increase in customer investment to meet their CSR expectations


Marks & Spencer is well-positioned for the future – an organization genuine, not just generous

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: Serious about social responsibility




Positioning for Your Future


Are you building your Enterprise of the Future?

Ad hoc and reactive change

Project driven change

Change portfolio and program

Anticipating and proactive change

Change becomes the strategy

HUNGRY FORCHANGE

Regulatory compliance

Strategic philanthropy

Values based self-regulation

Efficiency through CSR

CSR as growth platform

GENUINE, NOT JUST GENEROUS

Exploring Business Model Innovation opportunities

Experimenting with BMI

Implementing BMI initiatives

Multiple BMI strategies

Radical and pervasive BMI

DISRUPTIVE BY NATURE

Exploring global opportunities

Driving specific global initiatives

Building global capabilities systematically

Global centers of excellence

Global enterprise innovation

GLOBALLYINTEGRATED

Customer intelligence

Customer information transparency

Two-way customer interaction

Customer collaborative development

Expanding customer aspirations

INNOVATIVE BEYONDCUSTOMERIMAGINATION

Building the Enterprise of the Future


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.


CEO Roundtable in Moscow – leaders talk

«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)


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



IBM Global CEO Study


Kirill Korniliev, CGM IBM EE/A

September 1st 2008

© Copyright IBM Corporation 2008 IBM Global Business Services IBM Global CEO Study The Enterprise...

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