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Creatingbreakthrough

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On demand business

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Creatingbreakthrough

  1. 1. 1 © 2002 IBM Corporation © 2004 IBM Corporation Creating Breakthrough in the On Demand World
  2. 2. 2 © 2004 IBM Corporation Today’s Reality “In the past, executives had the luxury of assuming that business models were more or less immortal. Companies always had to work to get better … but they seldom had to get different—not at their core.” —Gary Hamel and Liisa Valikangas, “The Quest for Resilience”
  3. 3. 3 © 2004 IBM Corporation Better vs. Breakthrough Objective Scope Outcome Focus The age of on demand business Zero latency Productivity throughout the value net Continually evolving strategic advantage Continuous innovation The age of business process reengineering Zero defects Efficiency within the firm Sustainable advantage Continuous improvement
  4. 4. 4 © 2004 IBM Corporation An on demand business is an enterprise whose business processes—integrated end-to-end across the company and with key partners, suppliers and customers—can respond with speed to any customer demand, market opportunity or external threat. On Demand Business: More than Just Getting Better
  5. 5. 5 © 2004 IBM Corporation Adoption of open standards Number of networked devices Bandwidth Interaction costs Processor speed Storage Business Design Breakthrough Enabled by Technology New business designs are emerging to enable companies and institutions to be more productive and responsive to whatever the world throws at them.
  6. 6. 6 © 2004 IBM Corporation Breakthrough in Supply Chain Management Inventory Management Supply Chain Collaboration Integrating SCM and CRM • Open standards • Internet connectivity • Enterprise applications • Barcodes • Enterprise applications • Barcodes • Radio frequency identification chips • Wireless communications • Open standards • Internet connectivity • Enterprise applications • Barcodes • Price drops on RF chips enabling them to be embedded individual items • Wireless communications • Open standards • Internet connectivity • Enterprise applications • Barcodes • Profits = unpredictable sales minus fixed cost of goods and cost of maintaining excess inventory • Profits = predictable sales minus lowest available cost of goods • Profits = increased sales based on customer insights minus lowest available cost of goods Technology enablers: Business model: BETTER BREAKTHROUGHBETTER BETTER • Profits = unpredictable sales minus lowest available cost of goods and cost of maintaining minimal inventory Just-in-time Merchandising
  7. 7. 7 © 2004 IBM Corporation On Demand Business Designs Deliver Significant Results Saks Discounted sourcing costs by 12 to 14 percent enterprise wide Kookmin BankHRsmart Improved customer service at the same time operating costs are expected to drop $250M Increased sales volume while reducing costs up to 30 percent New Business Design Breakthrough Results Outsource procurement of “generic” merchandise Investments in differentiated services force elimination of duplicate business processes New web-based business for HR recruiting, staffing, performance management
  8. 8. 8 © 2004 IBM Corporation Insights about On Demand Businesses 1 2 The need for flexibility and innovation forces increased componentization of the overall business and its processes Applications evolve on a parallel path— becoming increasingly modular 3 Simplification of the underlying IT infrastructure is required to support the changes in the business
  9. 9. 9 © 2004 IBM Corporation The Essentials of an On Demand Breakthrough Flexible Financial & Delivery Options ENTRY ENTRY Where you start depends on YOUR organization’s priorities. Business Transformation On Demand Operating Environment BusinessProcesses • Increasing flexibility is the key—business models, processes, infrastructure, plus financing and delivery
  10. 10. 10 © 2004 IBM Corporation The First Essential of an On Demand Breakthrough Flexible Financial & Delivery Options Business Transformation On Demand Operating Environment BusinessProcesses • Create strategic advantage through differentiation and productivity • Integrate partners to increase effectiveness and flexibility
  11. 11. 11 © 2004 IBM Corporation Breakthrough Design Takes Deep Industry Expertise Retail Targets for transformation: Supply chain collaboration, increasing associate productivity Expected benefits: Faster time-to-market; fewer ordering and invoicing errors Consumer Packaged Goods Targets for transformation: Delivering value to the customer, strengthening product portfolio Expected benefits: Better customer retention, increased market share Electronics Targets for transformation: Supply chain responsiveness, managing industry volatility Expected benefits: Improved PO management, reduced latency
  12. 12. 12 © 2004 IBM Corporation Strategy Tactics Execution Consumer Relationship Customer Relationship Manufacturing Supply Chain & Distribution Business Administration Business Design: Moving from Possibilities to Priorities Example: Consumer Packaged Goods Category/Brand Strategy Brand P&L Management Matching Supply and Demand Marketing Development & Effectiveness Product Ideation Marketing Execution Product Directory Category/Brand Planning Assessing Customer Satisfaction Customer Insights Account Management Value-Added Services Customer Account Servicing Retail Marketing Execution Customer Directory Manufacturing Strategy Supplier Relationship Management Production and Materials Planning Manufacturing Oversight Supplier Control Make Products Plant Inventory Management Manufacturing Procurement Assemble/Pkg. Products Distribution Oversight Distribution Center Operations Transportation Resources En route Inventory Management In-bound Logistics Corporate Strategy Alliance Management Line of Business Planning Business Performance Management External Market Analysis Organization and Process Design Legal and Regulatory Compliance Treasury and Risk Management Facilities and Equipment Management IT Systems and Operations HR Administration Customer Relationship Strategy Customer Relationship Planning Supply Chain Strategy Supply Chain Planning Out-bound Logistics Accounting and GL Indirect Procurement Corporate Planning Concept/Product Testing Product Development Product Management Consumer Service In-store Inventory Mgmt First, break down your business into its components1 2 3 4
  13. 13. 13 © 2004 IBM Corporation Strategy Tactics Execution Customer Relationship Manufacturing Supply Chain & Distribution Business Administration Business Design: Moving from Possibilities to Priorities Category/Brand Strategy Brand P&L Management Matching Supply and Demand Marketing Development & Effectiveness Product Ideation Marketing Execution Product Directory Category/Brand Planning Assessing Customer Satisfaction Customer Insights Account Management Value-Added Services Customer Account Servicing Retail Marketing Execution Customer Directory Manufacturing Strategy Supplier Relationship Management Production and Materials Planning Manufacturing Oversight Supplier Control Make Products Plant Inventory Management Manufacturing Procurement Assemble/Pkg. Products Distribution Oversight Distribution Center Operations Transportation Resources En route Inventory Management In-bound Logistics Corporate Strategy Alliance Management Line of Business Planning Business Performance Management External Market Analysis Organization and Process Design Legal and Regulatory Compliance Treasury and Risk Management Facilities and Equipment Management IT Systems and Operations HR Administration Customer Relationship Strategy Customer Relationship Planning Supply Chain Strategy Supply Chain Planning Out-bound Logistics Accounting and GL Indirect Procurement Corporate Planning Concept/Product Testing Product Development Product Management Consumer Service In-store Inventory Mgmt Strategic differentiation Strategic View Competitive parity Basic Next, decide what’s differentiating and what is simply operating1 2 3 4 Example: Consumer Packaged Goods Product Management
  14. 14. 14 © 2004 IBM Corporation Strategy Tactics Execution Customer Relationship Manufacturing Supply Chain & Distribution Business Administration Business Design: Moving from Possibilities to Priorities Category/Brand Strategy Brand P&L Management Matching Supply and Demand Marketing Development & Effectiveness Product Ideation Marketing Execution Product Directory Category/Brand Planning Assessing Customer Satisfaction Customer Insights Account Management Value-Added Services Customer Account Servicing Retail Marketing Execution Customer Directory Manufacturing Strategy Supplier Relationship Management Production and Materials Planning Manufacturing Oversight Supplier Control Make Products Plant Inventory Management Manufacturing Procurement Assemble/Pkg. Products Distribution Oversight Distribution Center Operations Transportation Resources En route Inventory Management In-bound Logistics Corporate Strategy Alliance Management Line of Business Planning Business Performance Management External Market Analysis Organization and Process Design Legal and Regulatory Compliance Treasury and Risk Management Facilities and Equipment Management IT Systems and Operations HR Administration Customer Relationship Strategy Customer Relationship Planning Supply Chain Strategy Supply Chain Planning Out-bound Logistics Accounting and GL Indirect Procurement Corporate Planning Concept/Product Testing Product Development Product Management Consumer Service In-store Inventory Mgmt High Capital Area Financial View High Cost Area High Cost & Capital Area Then, analyze costs1 2 3 4 Example: Consumer Packaged Goods Product Management
  15. 15. 15 © 2004 IBM Corporation Strategy Tactics Execution Product Management Customer Relationship Manufacturing Supply Chain & Distribution Business Administration Business Design: Moving from Possibilities to Priorities Category/Brand Strategy Brand P&L Management Matching Supply and Demand Marketing Development & Effectiveness Product Ideation Marketing Execution Product Directory Category/Brand Planning Assessing Customer Satisfaction Customer Insights Account Management Value-Added Services Customer Account Servicing Retail Marketing Execution Customer Directory Manufacturing Strategy Supplier Relationship Management Production and Materials Planning Manufacturing Oversight Supplier Control Make Products Plant Inventory Management Manufacturing Procurement Assemble/Pkg. Products Distribution Oversight Distribution Center Operations Transportation Resources En route Inventory Management In-bound Logistics Corporate Strategy Alliance Management Line of Business Planning Business Performance Management External Market Analysis Organization and Process Design Legal and Regulatory Compliance Treasury and Risk Management Facilities and Equipment Management IT Systems and Operations HR Administration Customer Relationship Strategy Customer Relationship Planning Supply Chain Strategy Supply Chain Planning Out-bound Logistics Accounting and GL Indirect Procurement Corporate Planning Concept/Product Testing Product Development Product Management Consumer Service In-store Inventory Mgmt Seek external provider/external utility Transformational View Consolidate and/or create internal utility No action Finally, prioritize your transformation initiatives1 2 3 4 Example: Consumer Packaged Goods Integrate and redesign
  16. 16. 16 © 2004 IBM Corporation Strategy Tactics Execution Consumer Relationship Customer Relationship Manufacturing Supply Chain & Distribution Business Administration Category/Brand Strategy Brand P&L Management Matching Supply and Demand Marketing Development & Effectiveness Product Ideation Marketing Execution Product Directory Category/Brand Planning Assessing Customer Satisfaction Customer Insights Account Management Value-Added Services Customer Account Servicing Retail Marketing Execution Customer Directory Manufacturing Strategy Supplier Relationship Management Production and Materials Planning Manufacturing Oversight Supplier Control Make Products Plant Inventory Management Manufacturing Procurement Assemble/Pkg. Products Distribution Oversight Distribution Center Operations Transportation Resources En route Inventory Management In-bound Logistics Corporate Strategy Alliance Management Line of Business Planning Business Performance Management External Market Analysis Organization and Process Design Legal and Regulatory Compliance Treasury and Risk Management Facilities and Equipment Management IT Systems and Operations HR Administration Customer Relationship Strategy Customer Relationship Planning Supply Chain Strategy Out-bound Logistics Accounting and GL Indirect Procurement Corporate Planning Concept/Product Testing Product Management Consumer Service In-store Inventory Mgmt Reality Check—What You Want vs. What You Have  The highest impact transformation priorities are typically horizontal processes  They’re cross-division—and probably cross-company  Yet today, elements of the new process are enmeshed in business unit silos and their corresponding monolithic applications and infrastructure  Traditional delivery and financing options have limited flexibility
  17. 17. 17 © 2004 IBM Corporation Business Processes: Where Business Meets IT • Horizontally integrated • Built to change BusinessProcesses
  18. 18. 18 © 2004 IBM Corporation Business Process Improvement—Sales BETTER: Functional optimization/automation Priorities: • Sales methodology • SFA/CRM applications • “Any time, anywhere” access • The corresponding infrastructure • Optimization of partner relationships Outcome: • Incremental revenue • Improved efficiency • Reduced costs Sales Partners
  19. 19. 19 © 2004 IBM Corporation Business Process Improvement—Marketing BETTER: Functional optimization/automation of complementary disciplines Priorities: • Development of Web programs for: • Lead generation • Self-service marketing and sales • Loyalty programs • Applications and infrastructure to support personalization, commerce, lead tracking, digital asset management Outcome: • Broader reach • Reduced costs through self-service Marketing Partners Web Partners Sales Partners
  20. 20. 20 © 2004 IBM Corporation Marketing Partners Web Partners Sales Partners Business Process Breakthrough BREAKTHROUGH: • End-to-end integration and optimization across the marketing and sales disciplines • Information-rich records on every customer and prospect used by Sales and Marketing • Custom campaigns nurture new opportunities—every tactic is recorded • When the sale closes, marketing reviews tactics to optimize spend Benefits: • Increased customer satisfaction • Horizontal integration of marketing and sales improves efficiencies dramatically • Close ratio improves • Tactics proven ineffective are eliminated Customer/ Prospect
  21. 21. 21 © 2004 IBM Corporation Desire for Breakthrough Drives a New IT Agenda Business Flexibility IT Simplification Horizontal Process Increased focus on business flexibility • Relentless use of open standards to enable communication and integration across the value net • Partner to sharpen focus and respond to opportunities and threats Requires an on demand IT environment • Ability to repurpose application functionality in order to support horizontal processes • Automation and virtualization of resources Partners Partners Partners
  22. 22. 22 © 2004 IBM Corporation Flexible Financial & Delivery Options Business Transformation On Demand Operating Environment BusinessProcesses The Second Essential of an On Demand Breakthrough • Leverages existing assets • Enables integration • Infrastructure design matches business design • Modular • Built for change • Standards-based
  23. 23. 23 © 2004 IBM Corporation Requires On Demand Operating Environment On Demand Operating Environment Business Flexibility IT Simplification Open standards are table stakes for an on demand operating environment Horizontal Process Business flexibility through integration of people, processes and information within and beyond the enterprise Integration Infrastructure Management IT simplification through automation and virtualization, enables access to and creates a consolidated, logical view of resources across a network
  24. 24. 24 © 2004 IBM Corporation Componentized Business Processes are the Key The flexibility to treat business processes and the underlying infrastructure as defined components that can be mixed and matched at will What you need: • A modular approach to infrastructure (software and server) design, development and execution Why: • To deliver the flexibility that’s necessary to deliver on the promise of “processes built to change” How it works: • Every application and resource is represented as a service with a standard interface which simplifies its activation and the exchange of information Business Flexibility IT Simplification Horizontal Process Partner Partner Integration Infrastructure Management
  25. 25. 25 © 2004 IBM Corporation The Way It’s Actually Done Integration Infrastructure Management • Model existing and new process and business • Develop the Business Case • Think of software development as a business process • Create necessary components (new and legacy-based) • Customize and assemble components • Underlying infrastructure is modular, built for change and standards-based • Monitor business and IT status • Act on autonomic policy • Choose from on- and off- premise execution • Deconstruct business model • Assess priority components Identify/Design Infrastructure Anticipate & Respond Define Process Model As Is/To Be Assemble New and Existing Components Prioritized components
  26. 26. 26 © 2004 IBM Corporation Third Essential: Flexible Financial and Delivery Options • Financing applies to non-IBM products, including ISV software, since most operating environments are multi-vendor. • Delivery applies to better management of existing assets, as well as deployment of new capabilities. • Economies of scale allow IBM to deliver skills and technology at a price lower than it would cost you to do it yourself. • Reduce risk by offloading the responsibility for—and attendant cost of—accommodating volatile shifts in demand.
  27. 27. 27 © 2004 IBM Corporation On Customer Premises Off Customer Premises The Spectrum of Delivery Options We Assist We Do it for YouDo it Yourself Offering IBM Provides Scenarios Traditional Dedicated SharedVariable Components and/or implementation services Components, implementation services, and tools Components, implementation services, and tools Components, implementation services, and tools Purchase OR Lease Dedicated hosting Shared hostingLease + On/Off OR Lease + Hosting Operating environment (IBM/vendor mix) Dedicated customer applications Shared utility applications and business processes Operating environment includes utility applications
  28. 28. 28 © 2004 IBM Corporation The Right Balance of Cost, Control and Flexibility Ideal For Scenario Control Cost Flexibility Organizations with consistent demand, sufficient business scale and IT skills delivering business value Organizations that need high scalability, capacity on demand, minimal capital investment and outsourced management Organizations likely to have peak or seasonal demands, that need to link costs with varying demand while still maintaining control Organizations that need moderate scalability, incremental investment and outsourced management Highest Low LowestMedium-HighHigh Medium-Low Highest Low LowestMedium-HighHigh Medium-Low Lowest High HighestMedium-LowLow Medium-High On Customer Premises Off Customer Premises We Assist We Do it for YouDo it Yourself Offering Traditional Dedicated SharedVariable Purchase Dedicated Hosting Shared HostingLease + On/Off Lease Lease + Hosting
  29. 29. 29 © 2004 IBM Corporation Risk Shifts With Responsibility On Customer Premises Off Customer PremisesLocation Offering Processes Applications Infrastructure Traditional Dedicated SharedVariable • PSF • Bridge Financing • Services Anywhere • OIO Customer Owns IBM Owns • PSF • Bridge Financing • Tivoli • Variable OIO • Workplace on demand Desktop Mgmt services • CuOD • PSF • Bridge Financing • Tivoli • Total Usage Financing • Application and Managed Hosting • Digital Content Mgmt Services • AML • E-Mail Archive • CRM on demand • Virtual Server Services • ODW on demand (04) • with ZANTAZ Optimize Control Optimize Flexibility Optimize Balance Sheet and TCO
  30. 30. 30 © 2004 IBM Corporation Expertise and Experience Speed Your Breakthrough • Deep industry expertise and methodology • Modeling tools and experience enhance business process flexibility • On demand operating environment based on open standards • Ecosystem of partners committed to enabling on demand breakthrough • Delivery and financing flexibility Flexible Financial & Delivery Options ENTRY ENTRYBusiness Transformation On Demand Operating Environment BusinessProcesses
  31. 31. 31 © 2004 IBM Corporation Making the Move to On Demand This is not a “one size fits all” proposition Some will start with Business Design and focus on their highest-priority transformation component Others will opt to simplify their infrastructure, consolidating systems, adding automation capabilities and finding more flexible ways to deliver the necessary capabilities IBM has the offerings and experience to help with either or both 1 2 3 4
  32. 32. 32 © 2004 IBM Corporation Breakthrough at HRsmart www.hrsmart.com Where they started: • Provider of Web-based talent management services • Needed to improve marketability to larger companies • Goal was faster response times and ability to handle increased volume How they changed: • Tapped IBM’s virtualized server and storage resources • Hosted infrastructure provides capacity on demand What they achieved: • Limitless scalability • Faster time-to-market (days vs. months) • Variable cost structure yields 20%-30% savings
  33. 33. 33 © 2004 IBM Corporation Breakthrough at Kookmin Bank Where they started: • Top 20% of customers accounted for 95% of total profits • Wanted to sharpen focus in an effort to increase ROE How they changed: • Analyzed operations using IBM Component Business Model (CBM) • Found 40-50% of activities were duplicated across the organization • Created shared utilities to standardize customer interaction and improve economies of scale What they achieved: • Expect to reduce operating costs by as much as 15% in the first year • On track to increase ROE from 18% to 22% www.kookminbank.com
  34. 34. 34 © 2004 IBM Corporation Breakthrough at Saks Where they started: • Just completed a series of acquisitions • Needed to control spending, reduce costs and improve financial performance • Sought to divest itself of non-core operations How they changed: • Worked with IBM to deploy Ariba e-procurement solution • Centralized, streamlined and automated processes that control spending, competitive bidding and negotiation of sourcing agreements What they achieved: • Flexible and efficient cost structures • Already realized 12% to 14% in procurement savings • On track to achieve anticipated ROI www.saks.com
  35. 35. 35 © 2004 IBM Corporation Where You Start Depends on Your Priorities Business Transformation Start with: Component Business Model Define: Your priority business component Assess: Underlying application and infrastructure assets Implement: Integrated business processes, new operating and ownership approaches Generate: Savings and reinvest them in more innovation Technology Infrastructure Optimization Start with: Operating Environment Define: Your priority – Integration, Automation, Virtualization Commit to: Open Standards, Infrastructure simplification, Business Process Management Enable: A priority business process Generate: Savings and reinvest them to generate additional cost savings -- or free up resources for innovation Reinvest Reinvest

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