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© Copyright IBM Corporation 2008
IBM Global Business Services
IBM Global 2008 CEO Study
The Enterprise of the FutureFEI Vancouver Chapter
October 21, 2008
Global CEO Study 2008 | October 2008 2 © Copyright IBM Corporation 2008
We spoke to 1,130 CEOs face-to-face and conducted in-depth analysis to determine the characteristics of the Enterprise of the Future
Industry break down of the 1,130- Communications 10%- Distribution 22%- Financial Services 17%- Industrial 23%- Public 22%- Other 6%
EMEA36%
Americas31%
Asia Pacific33%
The IBM Global CEO Study focused on how organizations are 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
68 in Canada
Geographic break down of the 1,130
Source: IBM Global CEO Study 2008,
Global CEO Study 2008 | October 2008 3 © Copyright IBM Corporation 2008
CEOs see significant change and opportunity ahead, and are radically changing their business designs to respond
CEOs are: Expecting significant change (increased by 33%) Clear that the ability to manage change has not kept pace – 39% feel
unprepared Investing heavily in engaging newly prosperous and more informed and
collaborative customers Moving aggressively toward global business designs, deeply changing
capabilities, partnering more extensively and using M&A Responding to customer expectations of corporate social responsibility as an
opportunity to differentiate
The collective wisdom of these CEOs has led us to the five core traits of the Enterprise of the Future.
Global CEO Study 2008 | October 2008 4 © Copyright IBM Corporation 2008
The Enterprise of the Future is …
Globally integrated
3Hungry for change
1Disruptive by nature
4Genuine, not just generous
5Innovative beyond customer imagination
2
© Copyright IBM Corporation 2008
IBM Global Business Services
The Enterprise of the Future is …
Hungry for Change… capable of changing quickly and successfully. Instead of merely responding to trends, it shapes and leads them. Market and industry shifts are a chance to move ahead of the competition … and disadvantage competitors
Global CEO Study 2008 | October 2008 6 © Copyright IBM Corporation 2008
More CEOs than ever before – 8 in 10 – anticipate turbulent change and plan bold moves in response .. and at the same time the Change Gap* has tripled
* Difference or ‘gap’ between expected level of change needed and past success in managing changeSource: IBM Global CEO Study 2008
Change Needed
No/limited Change
Moderate Change
Substantial Change
No/limited Success
Moderate Success
Successful
Past Change Success
20068%
CHANGE GAP*
Change Needed Past ChangeSuccess
13%
22%
12%
31%
57%
200822%
CHANGE GAP*
Change Needed Past ChangeSuccess
6% 19%
20%
61%65%
11%
83%
Global CEO Study 2008 | October 2008 7 © Copyright IBM Corporation 2008
… and the Change Gap for Canadian CEOs was 50% larger than their global peers
* Difference or ‘gap’ between expected level of change needed and past success in managing change
Change Needed Past ChangeSuccess
2008 (Global)
22%CHANGE GAP*
6%
11%
83%
19%
20%
61%
Change Needed Past ChangeSuccess
2006(Global)
8%CHANGE GAP*
13%
22%
65%
12%
31%
57%
Change Needed Past ChangeSuccess
2008 (Canada)
33%CHANGE GAP*
5%
86%
10%
21%
24%
53%
No/limited Success
Moderate Success
Successful
Past Change Success
Change NeededNo/limited Change
Moderate Change
Substantial Change
Source: IBM Global CEO Study 2008,
Global CEO Study 2008 | October 2008 8 © Copyright IBM Corporation 2008
Companies that delivered higher revenue growth managed change more successfully
Change Needed Past ChangeSuccess
* Difference or ‘gap’ between expected level of change needed and past success in managing change
Change Needed Past ChangeSuccess
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*29%
CHANGE GAP*
CEOs of organizations with outperforming revenue growth are more confident about their ability to implement change
5%10%
85%
17%
17%
66%
4%
13%
83%
24%
22%
54%
Global CEO Study 2008 | October 2008 9 © Copyright IBM Corporation 2008
CEOs say the gap widens because of the accelerating pace of change
“The key to successful transformation is changing our mind-set. For large companies, it is easy to be complacent — we have to change this. Our company culture must have a built-in change mechanism.”Masao Yamazaki, President and CEO, West Japan Railway Company
“The speed of change, with regard to the Chinese market, is very quick. You have to be ready or you are left behind.”Richard Lavin, Group President, Caterpillar Inc.
“What worked in the past will not work in the future. This is the 21st century, not the latter half of 20th.“US
“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
“My organization has not been quick enough; change is hard. A few years ago we were a national company, now we're a global company.”US
“We're in a white-water world.”Canada
“Change in our organization is not happening fast enough… the gap is opening up.”Australia
Global CEO Study 2008 | October 2008 10 © Copyright IBM Corporation 2008
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 can no longer focus on a narrow set of challenges and intend to manage a broader agenda and greater uncertainty
External Forces Impacting the Organization
Source: IBM Global CEO Study
Market factors
People skills
Technological factors
Global CEO Study 2008 | October 2008 11 © Copyright IBM Corporation 2008
Interestingly, people skills top the list in Canada by a long shot!
Canadian CEOsGlobal CEOs
External Forces Impacting the Organization
64%
44%
Source: IBM Global CEO Study 2008,
Global CEO Study 2008 | October 2008 12 © Copyright IBM Corporation 2008
Are you ready?
Does your organization have a healthy appetite for change?
Have you seeded your organization with visionary challengers and provided them with the freedom to effect meaningful change?
Do you manage change as a structured program and measure change management effectiveness?
Do you have robust processes in place to incubate new product, service and business model concepts — and redirect investment when required?
Ad hoc and reactive change
Project-driven change
Change portfolio and program
Anticipating and proactive change
Change becomes the strategy
HUNGRY FORCHANGE
Building the Enterprise of the Future
© Copyright IBM Corporation 2008
IBM Global Business Services
The Enterprise of the Future is …
Innovative Beyond Customer Imagination
… surpasses the expectations of increasingly demanding customers. Deep collaborative relationships with customers and partners foster innovation
Global CEO Study 2008 | October 2008 14 © Copyright IBM Corporation 2008
Customers are becoming more demanding, but rather than seeing this development as a threat, CEOs see an opportunity for differentiation
Means
5.04
5.30
5.19
5.29
5.28
4.62
1 2 3 4 5 6 7
Increasing customerexpectations for Corporate
Social Responsibility
Rise of informed andcollaborative customers
Rise of purchasing power inrapidly developing
economies and prosperity inWestern economies
Global Canada
Very negative impact
Very positive impact
No impact
Source: IBM Global CEO Study 2008,
“Developing countries grow gradually at first, then suddenly emerge as large markets. We must be prepared to respond quickly. This will require us to make fundamental changes to our business now, rather than implement event-driven reactions.”Yasuo Inubushi, President, Kobe Steel
Global CEO Study 2008 | October 2008 15 © Copyright IBM Corporation 2008
Three-quarters of CEOs view increasingly demanding customers not as a threat, but as opportunity to differentiate
Source: IBM Global CEO Study 2008
No impact 14%
Positive impact 76%
Negative impact 10%
Impact
“The rise of the informed and knowing consumer will continue to have an impact regarding our go-to-market priorities. We must know how to leverage new media. We've been surprised by the impact that just a few consumers can have with their blog entries.”Rob Hurlbut, CEO, Attune Foods
“There are no homogenous consumers anymore. We have to find ways to address different segments with individual sales channels and product offerings without increasing complexity and its related costs.”Dr. Torsten Oletzky, CEO, ERGO Versicherungsgruppe AG
• New operational capabilities• Increased transparency• New customer segments
Focus Areas“We must redefine our value proposition to customers. Information and advisory content are becoming even more valuable than traditional drivers.”H. Edward Hanway, Chairman & CEO, CIGNA Corp.
Global CEO Study 2008 | October 2008 16 © Copyright IBM Corporation 2008
Are you ready?
Which of your offerings are breaking new ground, opening entirely new segments or markets? What can you learn from them?
Are you systematically evaluating potential geographic markets?
How do you achieve the efficiencies of global brands, products and services while remaining locally relevant?
When customer preferences shift, are you the first to understand and act on this or do your competitors react more quickly?
Are you effectively integrating disparate data and systems to gain new customer insights?
Customer intelligence
Customer information transparency
Two-way customer interaction
Customer collaborative development
Expanding customer aspirations
INNOVATIVE BEYONDCUSTOMERIMAGINATION
Building the Enterprise of the Future
© Copyright IBM Corporation 2008
IBM Global Business Services
The Enterprise of the Future is …
Globally Integrated… business designs are strategically designed to access the best capabilities, knowledge and assets from wherever they reside in the world and apply them wherever required
Global CEO Study 2008 | October 2008 18 © Copyright IBM Corporation 2008
CEOs are planning radical changes in business design to capitalize on global integration
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 of capabilities, knowledge
and assets
Grow through mergers & acquisitions
Do everything in-house
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
Global CEO Study 2008 | October 2008 19 © Copyright IBM Corporation 2008
CEOs are planning radical changes in business design to capitalize on global integration; Canadian CEOs however seem more domestically focused
Do everything in-housePartner extensively
Localize brands/productsGlobalize brands/products
Strive for one cultureDrive multiple cultures
Optimize your operations locallyOptimize your operations globally
Defend your coreActively enter new markets
Maintain the current mix of c/k/a in your organization
Deeply change the mix of capabilities/ knowledge/assets (c/k/a) in your organization
3 2 1 0 1 2 3
Grow organicallyGrow through mergers & acquisitions
Global
Canada
Source: IBM Global CEO Study 2008
Equally Important
Global CEO Study 2008 | October 2008 20 © Copyright IBM Corporation 2008
Cluster analysis revealed four common approaches toward global integration
1. Extensive Globalizers- Highly networked businesses, adopting a global
approach to all elements of integration
2. Globalizers- Businesses that optimize globally, but already
have part of the capabilities, knowledge and assets they need, and focus on a single culture, not multiple
3. Blended Thinkers- Businesses that optimize through a mix of global
and local approaches, with multiple cultures
4. Localizers- Insulated businesses with a blended growth
approach
Blended Thinkers
17%
Extensive Globalizers
31%
Globalizers 33%
Localizers 19%
Source: IBM Global CEO Study 2008
Localizers19%
Blended Thinkers
17%
Extensive Globalizers
31%
Globalizers33%
Global CEO Study 2008 | October 2008 21 © Copyright IBM Corporation 2008
Cluster analysis revealed four common approaches toward global integration
Source: IBM Global CEO Study 2008
Drive multiple cultures
Grow organically
Strive for one culture
Localize brands/products
Do everything in-house
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)
Globalizers (n=246)
Blended Thinkers (n=131)
Localizers (n=140)
Global CEO Study 2008 | October 2008 22 © Copyright IBM Corporation 2008
Are you ready?
Are you effectively integrating differentiating capabilities, knowledge and assets from around the world into networked centers of excellence?
Does your organization have a globally integrated business design (even if it does not have a global footprint)?
Do you have a detailed plan for global partnering and M&A?
Are you developing leaders that think and act globally?
Do you nurture and support social connections to improve integration and innovation?
Exploring global opportunities
Driving specific global initiatives
Building global capabilities systematically
Global centers of excellence
Global enterprise innovation
GLOBALLYINTEGRATED
Building the Enterprise of the Future
© Copyright IBM Corporation 2008
IBM Global Business Services
The Enterprise of the Future is …
Disruptive by Nature… challenges existing business models, disrupting the basis of competition. Shifts the value proposition, overturns traditional delivery approaches and, as soon as opportunities arise, reinvents itself and its entire industry
Global CEO Study 2008 | October 2008 24 © Copyright IBM Corporation 2008
CEOs implement initiatives to evolve their business model; outperformers aim to disrupt their enterprise or industry model
Business Model Innovation. “Significantly changing the structure and / or financial model of the business”. There are three types of business model innovation:- Industry model innovation – Innovating the industry value chain by Moving into
new industries, redefining existing ones or creating entirely new value chains- Revenue model innovation – Innovating how revenue is generated through new
value propositions or pricing models- Enterprise model innovation – Innovating value chain roles by Changing the
extended enterprise to be either more integrated or more specialized or Transforming networks of employees, suppliers, customers and others
Global CEO Study 2008 | October 2008 25 © Copyright IBM Corporation 2008
Across the globe, a full two-thirds of all CEOs plan to be engaged in some form of business model innovation over the next 3 years
29%
2%
69%
Limited/NoBMI Focus
Moderate BMIFocus
Strong BMIFocus
“When the business model is innovative, operations and the product will follow automatically.”Ronald de Jong, CEO, Philips Germany
29%
69%
1%
30%
69%
6%
28%
66%
2%
Limited/NoBMI Focus
Moderate BMIFocus
Strong BMIFocus
Established EconomyEmerging EconomyCanadian Economy
Source: IBM Global CEO Study 2008,
Global CEO Study 2008 | October 2008 26 © Copyright IBM Corporation 2008
56%
91%
New Pricing/TaxationStructures and Models
ReconfigureProduct/Service/Value
Mix
n = 234 n = 203
Source: IBM Global CEO Study 2008
38%
57%
71%
Work WithinOrganization
Focus onDifferentiating
Activities
IntenseCollaborationwith External
Partners
Enterprise Model Innovation Focus
n = 369
Revenue Model Innovation Focus
36% 36%
73%
Create EntirelyNew Industries
Move Into NewIndustries
RedefineExisting Markets
Industry Model Innovation Focus
Collaboration is instrumental to drive Enterprise Model Innovation
Revenue Model innovators shift the value mix
Industry Model Innovation remains rare
Within the various business models, CEOs plan to implement distinct initiatives
Global CEO Study 2008 | October 2008 27 © Copyright IBM Corporation 2008
56%
91%
New Pricing/TaxationStructures and Models
ReconfigureProduct/Service/Value
Mix
n = 234 n = 203
Source: IBM Global CEO Study 2008
38%
57%
71%
56%
44% 44%
Work WithinOrganization
Focus onDifferentiating
Activities
IntenseCollaborationwith External
Partners
Enterprise Model Innovation Focus
n = 369
Revenue Model Innovation Focus
36% 36%
73%
Create EntirelyNew Industries
Move Into NewIndustries
RedefineExisting Markets
Industry Model Innovation Focus
Collaboration is instrumental to drive Enterprise Model Innovation
Revenue Model innovators shift the value mix
Industry Model Innovation remains rare
Canadian CEOs are more focused internally and much less on collaborating with external partners
Canadian CEOs
Global CEO Study 2008 | October 2008 28 © Copyright IBM Corporation 2008
Are you ready?
Is a disruptive business model about to transform your industry? Is it more likely to come from you or your competitors?
Do you spend time thinking about where the next disruption will come from?
Are you watching other industries for concepts and business models that could transform your market?
Are you able to create space for entrepreneurs and innovative business models while continuing to drive performance today?
Exploring Business Model Innovation opportunities
Experimenting with BMI
Implementing BMI initiatives
Multiple BMI strategies
Radical and pervasive BMI
DISRUPTIVE BY NATURE
Building the Enterprise of the Future
© Copyright IBM Corporation 2008
IBM Global Business Services
The Enterprise of the Future is …
Genuine, not just Generous
… doing well in the world goes beyond philanthropy and regulatory compliance. it reflects genuine concern for society in all actions and decisions and prospers and profit as a result
Global CEO Study 2008 | October 2008 30 © Copyright IBM Corporation 2008
Faced with rising customer expectations of CSR, more than two-thirds of CEOs take a positive view, and plan to innovate … more Canadian CEOs see CSR as an opportunity and not a threat
No impact 20%
Positive impact 69%
Negative impact 11%
Impact of increasing customer expectations of corporate social responsibility
Global
Source: IBM Global CEO Study 2008,
“ 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
“Our strong commitment to corporate sustainability will be a clear differentiator for us with all stakeholders.”Tom Johnstone, CEO, SKF
“I see corporate responsibility going through three phases. People start to consider issues like the environment because they are compelled to do so. Then they realize that it actually makes business sense. Eventually they move beyond compulsionand selfish motives to become passionate because it is the right thing to do.”Vinod Mittal, Managing Director, ISPAT Industries
Global CEO Study 2008 | October 2008 31 © Copyright IBM Corporation 2008
Are you ready?
Do you understand your customers’ CSR expectations? How are you involving them in solutions?
Do you know which NGOs your customers listen to and are you collaborating with those groups?
Have you gained insights from current green initiatives that can be applied to your broader corporate social responsibility strategy?
Are you offering employees the opportunity to personally make a difference?
How do you ensure that actions taken throughout the enterprise — and the extended value chain — are consistent with your CSR values and stated policies?
Regulatory compliance
Strategic philanthropy
Values based self-regulation
Efficiency through CSR
CSR as growth platform
GENUINE, NOT JUST GENEROUS
Building the Enterprise of the Future
© Copyright IBM Corporation 2008
IBM Global Business Services
The Enterprise of the Future
Positioning for Your Future
Global CEO Study 2008 | October 2008 33 © Copyright IBM Corporation 2008
Building an Enterprise of the Future is a journey --- Where does your organization stand?
Ad hoc and reactive change
Customer intelligence
Exploring global opportunities
Exploring Business Model Innovation opportunities
Regulatory compliance
Project driven change
Customer information transparency
Driving specific global initiatives
Experimenting with BMI
Strategic philanthropy
Change portfolio and program
Two-way customer interaction
Building global capabilities systematically
Implementing BMI initiatives
Values based self-regulation
Anticipating and proactive change
Customer collaborative development
Global centers of excellence
Multiple BMI strategies
Efficiency through CSR
Change becomes the strategy
Expanding customer aspirations
Global enterprise innovation
Radical and pervasive BMI
CSR as growth platform
HUNGRY FORCHANGE
GLOBALLYINTEGRATED
DISRUPTIVE BY NATURE
GENUINE, NOT JUST GENEROUS
INNOVATIVE BEYONDCUSTOMERIMAGINATION
Building the Enterprise of the Future
Global CEO Study 2008 | October 2008 34 © Copyright IBM Corporation 2008
Change, disruption and innovative business models
Sustainable growth: the planet and its people
The new customer: informed and empowered
Global integration for large and small
Lead the waves of change with collaborative business models and disruptive innovation
Build brands, products and services that attract a growing class of environmentally and socially-aware customers, employees, investors and partners
Tap into new markets and scarce talent by integrating global organizations and partnering with global networks
Differentiate your organization by engaging a new class of informed, demanding and collaborative customers
IBM launched InnovationJam 2008 to answer the “How” question in closing the gaps in creating the Enterprise of the Future. Participants from across the globe shared views on leading their companies and industries through:
Results will be available in early 2009.
Global CEO Study 2008 | October 2008 35 © Copyright IBM Corporation 2008
In Summary …
Organizations will evolve to the Enterprise of the Future Need for change continues to accelerate due to both external and internal
factors Entities have only been successful in achieving large scale change about 60%
of the time The culture for and the management of change is thus receiving increasing
focus Change is required around 4 dimensions
- Innovation around the customer reflecting changing expectations for products and services and for how they are provided/delivered
- Global integration to exploit opportunities, capabilities, knowledge and assets where ever they may reside
- Rethinking business models sharpening focus- Address changing expectations around corporate social responsibility
Global CEO Study 2008 | October 2008 36 © Copyright IBM Corporation 2008
John FurseyStrategy & Change Consulting LeaderIBM Global Business Services Canada416-478-3354jfursey@ca.ibm.com
IBM Contact
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