siemens 2012 plm conference - ibm keynote by paul brody
DESCRIPTION
The IBM keynote presentation at the Siemens PLM conference in Phoenix, Arizona. Presented by Paul Brody on 12 March 2012. This document contains a view of how I think product development strategy is changing in the electronics industry, particularly in my role as the electronics industry leader. These are my personal views and while they are presented in my capacity as an IBMer, this document shouldn't be considered an official viewpoint on the industry from IBM or an official statement of IBM's corporate strategy. The view expressed in this document is just one perspective among many that exist within such a large and diverse consulting & technology organization. The summary message of the document is that we are entering a new era of product development - one in which our old certainties are no longer reliable. In the past, we really focused on developing products - specific physical items. More recently, companies like IBM and others moved to develop systems and services - networks of products and solutions. Today, we are about to enter a new era - one where we design solutions targeted at business models. Thinking not just about performance metrics of a device or results of a business process in a system - but end-to-end business performance. This is very very difficult to accomplish, but if we can do so, we can reap enormous rewards, face few competitors, and generate enormous value for our clients.TRANSCRIPT
© 2012 IBM Corporation
The Death of Product Design: How Continuous Connectivity, Social Networks and Big Data Are Killing Product Development
Paul BrodyGlobal Industry Leader, ElectronicsIBM
March 2012
© 2012 IBM Corporation2 Confidential Material
Product design as we knew it is dying. The suspects: a trio of new technologies
Continuous Connectivity Social Networking Information Analytics
© 2012 IBM Corporation3
One more analyst report. One more presentation. These mega-trends are starting to feel like clichés – and irrelevant ones at that
Confidential Material. Tomorrowland Image creative commons license, Flickr user Big Dump
Dire predictions of transformation are starting to feel a dated exhibit in TomorrowLand.
© 2012 IBM Corporation4 Confidential Material
Despite the hype, interesting things are happening that have big implications for how we develop & use every kind of product
Connectivity
Social Networking
Analytics
SimplerFasterRadically Cheaper
DetailedAccurateCompletely Automatic
SmarterSelf-AwareSelf-Organizing
© 2012 IBM Corporation5 Confidential Material
The most interesting things are happening at the intersections of these trends - innovation in a rich edge environment
Connectivity Social Networking
Analytics
Predict behavior and results
Change behavior and results
© 2012 IBM Corporation6 Confidential Material
The result: old certainties about product development – what we do and how we do it, are going away
Life Cycles
Product Definition
User Experience
Clock, Blueprint, and Screen Images creative commons license, Flickr users
Continuously Shorter
More Complex
Static & Functional
Longer
Simpler
Dynamic & Consumerized
© 2012 IBM Corporation7 Confidential Material
Longer product life cycles are a result of changing business models – both in the consumer space and in industrial
Extended life cycles enabled by retrofits and government procurement cycles.
High reliability is raising average fleet age and slowing some refresh cycles
Life cycles rising from 6 mos to 1 year due to lack of differentiation
© 2012 IBM Corporation8 Confidential Material
Product complexity and variation are actually declining (but systems complexity is exploding)
• Snap together approach• Fewer parts, variants• Significantly reduced
options & customization
Simpler Products Complex Systems
• 10-1000X increase in network complexity
• Smart, self-organizing, self-optimizing networks
Heterogeneous Next Generation Mobile Networks
LTE HSPA
WiFI
Small Cells
© 2012 IBM Corporation9 Confidential Material
User experience transformation – it means the end of RTFM
User Profiles Are Changing• Fewer operators = lower costs• Lower qualifications = lower
costs• Faster time to productivity =
lower costs• Modern UI = Better Recruiting
From Static to Dynamic:
• A/B Testing, Continuous Change & Refinement
• Gamification – to optimize user behavior
• Simplification – to drive lower operating costs
Influenced by the Facebook generation, enabled by continuous connectivity
Cockpit Crew Image creative commons license, Flickr users
© 2012 IBM Corporation10 Confidential Material
What’s driving the end of all the traditional certainties in product development? Business Model Transformation
Life Cycles
Product Definition
User Experience
• Annuity Revenue Streams: with transition from products to services
• Reduced Risk: Fewer options and longer cycles means lower turn-over and component risk
• Increased Margins: Add new revenue streams on existing hardware & devices
• Reduced Operating Costs: thanks to labor arbitrage and user experience design
All these changes…… in the service of business model transformation
© 2012 IBM Corporation11
So if we’re not focused on products anymore, what are we doing?
Confidential Material
Products Systems & Services Business Models
ATC, and Airline Hub Images creative commons license, Flickr users
© 2012 IBM Corporation12 Confidential Material
The search of sustainable competitive differentiation is driving the changes in business model operations
SystemProduct Business Model
• Process Metrics• On-going services
relationship
• Speeds & Feeds• One-time sale
• Business Metrics• Deep strategic
partnership
• Solutions can be unbundled & value can migrate
• Can be replicated & commoditized
• Hardest to replicate, unbundle or replace
Metrics
Competition
© 2012 IBM Corporation13
What does this really mean for a company like IBM as we think about engagement with our clients
Confidential Material
SystemProduct Business Model
• Integrated Point of Sale Solutions
• Intel-Based Servers • Partnerships for growth & profit
• Transaction cost• Retail staff productivity
• Price/performance benchmarks
• Total business profit and revenue growth
Offering
Metrics
• Limited• Intense • Very fewCompetition
• Medium• Low • HighClient Value
Airtel Shop Image creative commons license, Flickr users
© 2012 IBM Corporation14 Confidential Material
To re-shape our business, we have to ask two fundamental questions. (Over and over again)
What business
are we in?
Who is our customer?
• Creating IT systems?• Offering business services?
• Solving business problems to make our clients successful?
• Consumers?• Enterprises?
• They were customers. Now we call them clients.
© 2012 IBM Corporation15
When you re-think the fundamental questions you get surprising business models. Case in point: SpectraYield
Confidential Material
John Deere makes tractors for farmers
…Spectrayield makes data for financial markets
• Optimal planting time & location
• Device maintenance and performance
• Customer needs & product insight
• Yields, output conditions• Futures & derivatives
• Market size & marketing data for B2B services
• Shared ownership models & finance
Using data generated by connected Harvesters, Spectrayield customers can cover as much as 100% of their equipment leasing costs
Image: Flickr, CC License, Dustin and Jena
© 2012 IBM Corporation16
When you change your business model, all your design and supply chain thinking has to change as well
Product– Printer– Toner– Service
Printer is designed for low-up front cost
Toner generates profit
Focus on preventing consumer from using 3rd party toner
Product is not designed for long service life
Confidential Material
Service– Price per page– Everything included
Device is networked to enable management
Designed for high reliability, long durability
Total cost per page to be minimized
Downtime=lost revenue
Xerox Image creative commons license, Flickr users
© 2012 IBM Corporation17 Confidential Material
Where the rubber meets the road: Our view of HD Design: It’s deeply integrated, multi-dimensional and closed loop
Tightly Integrated
Multi-Dimensional
Closed Loop
• Think systems and solutions, not hardware and software separately
• More and more variables to consider beyond system performance
• Keep more and more responsibility for the product than ever before
All Delivered In HD
© 2012 IBM Corporation18 Confidential Material
We’re partnered with Siemens because we share a vision of how the technology & process need to serve the business model
The IBM-Siemens Alliance Delivers Unique Joint Value
Leading Siemens PLM solutions
Leading industry and domain practice expertise
Strong partnership that underpins our commitment to deliver solutions to our joint customers to deliver:
Faster return on investment
Accelerated Innovation
Effective enterprise integration
Team Center / IBM “Blue Stack” Enablement: DB2, Power7, Websphere, Rational …
Siemens PLM Software Solution Offerings and Industry
Expertise
IBM Process Consulting,
SI & Industry
Insight(GBS)
IBM Enterprise Application and Industry Competency (SWG & STG)
JOINT
ACCOUNTS
JOIN
T
OFFERINGS
© 2012 IBM Corporation19 Confidential Material
We’re re-wiring our organization and our business process to make the transition into the era of business model design
OrganizationPeople Systems
• Change org bias towards global integration
• Deep knowledge of our client business models
• Full life-cycle view• Leverage global
talent pool
• Created global CoCs for industry talent
• Integrated hardware & software into one group
• Created IBM Industry Academy
• Increased focus on industry alignment
• Leveraging big data in end-to-end design
• Deploying global design cloud
© 2012 IBM Corporation20 Confidential Material
IBM’s Quality Early Warning system links design, manufacturing and field operations for early detection of problems
Suppliers Factory Field
Design Procurement Service
Using advanced analytics, we can find problems significantly faster than with traditional Statistical Process Controls
© 2012 IBM Corporation21 Confidential Material
IBM’s design cloud enables anytime anywhere design, securely
Note: site examples, not complete location list
Bangalore
Boeblingen
AustinPOWER7
Yamato,Kyoto
Rochester
Poughkeepsie
Haifa
Yorktown
La Gaude
• IBM IT cost per developer reduced by ≈ 50%• Centralized servers achieved >90% utilization
24x7
• Power 7 development cycle shortened by six months (18 months versus 24 months)
• Two programs staffed out of 1.75 teams
Realizing key business value propositions
© 2012 IBM Corporation22 Confidential Material
Change may be coming – but when? In some industries, talk about “Smarter Planet” and changing models seems pre-mature
Connectable vs. Connected
Data vs.Insight
Products vs.Solutions
Percentage of the installed based that can be connected to the Internet and the proportion that actually is being connected.
Percentage of the installed base where analytics is applied to usage and performance data to predict maintenance or other requirements.
Revenue from bundled solutions vs. discrete product, service sales.
30%
40%
30%
OtherConnectableConnected
100%Predictive
Reactive
80%
15%
5%
ProductsServicesSolutions
Source: Data based on interviews with client executives. Numbers under 5% mean “unknown and thought to be very small” rather than 0.
Case Example: Industrial Automation Company in 2011
© 2012 IBM Corporation23
Pace of change is unpredictable and prone to sudden acceleration.
Confidential Material
Life Cycle & Installed Based
Don’t Drive Value
Adoption of New Technologies Is
Speeding Up
Events Can Overtake Strategy
• Long life cycles & relationships are profitable
• Moore’s law has been remarkably constant
• Sudden events can sweep aside entire industry strategies
• New orders & growth drive most of an enterprise value
• Pace of adoption of new technologies is increasing.
• Aircraft leasing & parts after 9/11
• Nuclear power after 3/11
Black Swans Image creative commons license, Flickr users
© 2012 IBM Corporation24 Confidential Material
Shift happens.Usually when you feel on top of the world.
1993 1983
© 2012 IBM Corporation25 Confidential Material
Thank You.Let’s Stay In Touch
Email • [email protected]
Linked In • Profile : http://www.linkedin.com/in/pbrody
Reading List • Delicious : http://www.delicious.com/prbrody
Twitter • @Pbrody• @IBM_Electronics