2007 keynote address - to electronics industry supply chain association

Global Business Services

© 2007 IBM Corporation

Keynote Address:Collaboration Goes Critical

Electronics Supply Chain Association


© 2007 IBM Corporation2 Supply Chain Strategy

Getting down to business: First bold prediction

2.5 cm

28 cm

Really Big

82 cm

Average LCD Screen Size in Consumer Household

1987 1997 2007 2017



Getting down to business: First bold prediction

2.5 cm

28 cm

Really Big

82 cm

Average LCD Screen Size in Consumer Household

1987 1997 2007 2017



Second bold prediction

1

3

16

7

Average Number of Remote Controls per Consumer Household

1987 1997 2007 2017



Second bold prediction

1

3

16

7

Average Number of Remote Controls per Consumer Household

1987 1997 2007 2017

Omnipotent

Universal Universal 2 Universal 3

9 10 116 71 2 3 4 5 8 12



How do we come up with these brilliant insights?

CEO Interviews

CE Industry Research++++

Experience as

Electronics Player

++++ ====3 3 3 3

Current Current Current Current RealitiesRealitiesRealitiesRealities



3 current realities

Operations & business model innovations are becoming harder to execute

Product innovation is important, but it is not enough

Extreme collaboration is required to compete and succeed

1

2

3



3 current realities

Operations & business model innovations are becoming harder to execute

Product innovation is important, but it is not enough


1

2

3



Everyone thinks they’re an innovator

Clear Innovation Leader

Fast Follower

Moves with Peers

Follows Peers

68%

Source: The Global CEO Survey 2006

Industry Position for Innovation in Products and Services

0% 10% 20% 30% 40% 50% 60% 70%

11%

Respondents

11%

11%



To some extent, that’s actually true

COMPANYIBM 3,621

Samsung 2,451

Canon 2,366

Matsushita (Panasonic) 2,229

HP 2,099

Intel 1,959

Sony 1,771

Hitachi 1,732

Toshiba 1,672

Micron Technology 1,610

PATENTS

Source: US Patent and Trademark Office – 2006 top 10 listhttp://www.uspto.gov/go/oeip/taf/topo_06.htm#PartB

10 of top 10 companies filing patents are in electronics



But not always:

Assignee:

Armonk, New York

December 11, 2001



A lot of our “innovation” is product in search of a problem. Case in point: internet TV



Operational and business model innovation are collectively equal to product innovation, CEOs tell us.. and we agree..

Operations

Business and Enterprise Models

Products, Services and Markets

26%

Source: The Global CEO Survey 2006

Innovation Area of Most Importance

0% 10% 20% 30% 40% 50%

31%

43%

Respondents



Operational and business model innovation defined…

Revenue Model

Innovation

Industry Model Innovation

Enterprise Model

Innovation

Change how industry is defined

Change how revenue is generated

Change how products & services are delivered



3 current realities

Operations & business model innovation are becoming harder to execute

Product innovation is important, but it is not enough.


1

2

3



Blockbuster products are requiring operational and business innovation standard

Advanced Hardware

Network Connectivity

Media Content



Bringing such highly integrated products to market is becoming more and more challenging

CONTENT

ADVANCED COMPONENTS

NETWORK CONNECTIVITY

1997 2007+

�Sold separately

�Felt like tangible property

�Integrated

�Subject to license

�Long life cycles

�Wide choice

�Short life cycles

�Limited availability

�SneakerNet �Integrated



Content providers may actually turn out to be the easiest part of this equation

Audio:

Content companies are eager not to let this opportu nity pass them by

• Centralized market, 6 leading content companies

Video (US):

Prior to 1998: Stability 1999-2001:Napster

• Rise of P2P, lack of viable paid alternatives

2002+:Legal Downloads

• Paid market grows back up

• Apple dominates

Prior to 2005: Stability 2004-2007: Broadband Critical Mass

Apple’s market

2007+

Market Value: $20B

Market Value: Up to $130B

Up for Grabs

• Broadcast, cable & satellite

• 27 million us homes with DSL

• Rise of UGC

• Paid market grows back up

• Apple dominates



Advanced chipsets are likely to be a much tougher delivery for CE companies

More and more fabless companies chasing an ever smal ler number of state-of-the-art development facilities.

Number of IC Design Enterprises in China, 1995-2005

Number of IC Companies with 200mm vs. 300mm Fabs



A similar consolidation is taking place in network equipment providers…

Number of NEPs From 20th Century to Today

1876Invention of Telephone

1876Invention of Telephone

Late - 90sInternet Boom

Late - 90sInternet Boom

2000Dot com Collapse

2000Dot com Collapse

1991Introduction of the World Wide

Web

1991Introduction of the World Wide

Web

2000 - TodayConvergence & Liberalization

2000 - TodayConvergence & Liberalization

1971First mobile

phone network

1971First mobile

phone network

Before1900

1900-1940 1940s 1950s 1960s 1970s 1980s 1990 1992 1994 1996 1998 2000 20 02 2004 2006 2007

Source: IBM IBV analysis



…who are just mirroring the consolidation of their customers, the network operators



Despite these challenges, there has never been a better time to innovate nor more at stake

Device Content Ads Network

$200$25 $10

$385 $620

10%

30%

90%

70%

Device

Content

Ads

Network

Typical Ecosystem Revenues Gross Margins By Componen t

Source: IBM research, client engagements



3 current realities

Operations & business model innovation are becoming harder to execute

Product innovation is important, but it is not enough.


1

2

3



We’ve been paying lip service to collaboration for years, can’t we keep doing that?

NO!

Complementary to business strategy

Core to business strategy

Loosely integrated to operations

Tightly coupled to operations

Unstructured, back of the envelope

Rocket science



Core to strategy: Nowhere more true than in semiconductor space

Complimentary Complimentary Complimentary Complimentary CapabilitiesCapabilitiesCapabilitiesCapabilities

� Pure-play foundry� Chip manufacturing scale

� Consumer products leader

� Product manufacturing expertise

� Process and materials research

� Product engineering excellence

� High yield chip design

Common Common Common Common FabFabFabFabprocess synchronizedprocess synchronizedprocess synchronizedprocess synchronized

Case example: IBM’s Common Platform



Collaboration is tightly integrated today. Welcome your marketing department to supply chain management

Product Supply

Sales Force

Market Promos

Integrated S&OP

Process Rigor: Deep integration across teams internally to line up supply and demand

�� Short life cycles and “hit driven” sales activities require collaboration between inventory management, the sales force, mark eting & retail partners

Collaboration: Close working arrangements to manage across multiple channels

One Viewpoint: Timely, integrated data accessible in a single environment



Rocket Science: Information volumes required for retail channel management are rising exponentially

Locations Information

Aisle

End Cap

Check Out

Display

Forecasts

Supply Plans

Plan-O-Grams

Allocations

�� Best in class management drives stocking levels based on promotions, store locations, and individual store history

Reg

iona

lN

ati

ona

lS

to

re



...and globally… China and India, with thousands of independent dealers pose their own challenges

The problem: layers in the distribution system add cost, reduce data accuracy:

OEM

Retailer

Local

Regional

National Distribution layers

To solve both issues, a major mobile device maker i s developing a direct to retailer wireless solution for the China market

OEM

Retailer

� Enterprise CRM system

� Wireless smart phone

System Functionality:

� Orders

� Inventory status

� Shipments

� Credit

� Invoicing

� Incentives & news

All accessible from a mobile device, all data available in retail from anywhere in China

A direct connection to the end retailer has never b een more important, something that’s hard to do with 10,000 independent retailers in one country



It’s difficult, but transformational products weave together different kinds of innovation

Revenue Model

Innovation

Industry Model Innovation

Enterprise Model

Innovation

�Hardware?�Software?�Service?

�Usage fee?�Subscription?�Device?

�Integrated?�Virtualized?�Joint venture?



We’ve come a long way: IBM has had more success since we’ve focused on collaborative efforts

IBM then… IBM now…

Cell processor, collaboratively designed with Sony and Toshiba on power platform


© 2007 IBM Corporation

Thank You

Paul Brody, PartnerIBM Global Business [email protected]

Wendy Huang, Managing ConsultantIBM Institute for Business [email protected]

2007 keynote address - to electronics industry supply chain association

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