Emerging business opportunities discussion with rpi
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Emerging Business Opportunities Discussion with RPI. Mike Giersch Vice President, Strategic Planning IBM Corporate Strategy. IBM Experience - Three Attempts. Circa 92. A Process Centered Approach Organization was going through some major process re-engineering.

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Emerging business opportunities discussion with rpi

Emerging Business OpportunitiesDiscussion with RPI

Mike Giersch

Vice President, Strategic Planning

IBM Corporate Strategy


Ibm experience three attempts

IBM Experience - Three Attempts

  • Circa 92. A Process Centered Approach

    • Organization was going through some major process re-engineering.

    • New business opportunity process added.

    • Groups were to implement process, corporate sponsors, facilitates best practice sharing, etc,

    • Corporate white space focus rejected by senior leadership

    • Process aborted – company faced very serious financial challenges, CEO change.

  • Circa 95. A Funding Centered Approach

    • Post major expense cutbacks, concern that some new things were cut, needed a life-line.

    • Created new business fund – groups nominate projects, corporate team evaluate and recommends funding. Funding provided, no on-going oversight or support

    • Funded mostly things that we would want groups to decide to fund … gaming the system to get extra funding … ‘bowling for dollars’… serving up ‘hearts and lungs’. Reinforced WRONG behavior.

    • Projects turned over to groups to manage. Funding process ended.

    • Ongoing, low profile, staff focus in corporate strategy on new business opportunities.

  • Circa 99. A Change Management Approach – The EBO System


Emerging business opportunities discussion with rpi

EBO Idea Sources Enterprise-Wide

External Sources

(Customer, VC)

Research

Sales & Distribution

Business Units

EBO Selection Criteria

Strategic alignment

Cross IBM leverage

New source of customer value

$1B+ revenue potential

Market leadership

Sustained profit potential

Benchmarks

Case Studies

Caselets

P&G

Cisco

Akamai

Business Intelligence

EBO Categories

New

Markets

New Business

Models

New/Disruptive

Technologies

Intel

ISP Market

RFID

Sun

Life Sciences

RS/6000 SP

Microsoft

PvC

SSD Microdrive

Consultant / VC Input

HORIZON 3

Emerging Opportunities

Test business models, prove viability, capabilities and value

Seed growth opportunities

Academic Literature

HORIZON 2

Growth business

Scale proven business models, increase market share, & grow to opportunity

HORIZON 1

Core business

Extend, defend, increase productivity and profit contribution

Time and Level of Uncertainty

Measures

The Portfolio

Profit

ROIC

Costs

Productivity or efficiency

High revenue growth

Market share gains

New customer acquisitions

Profit

Project-based milestones

Creating the Business Design

In market pilots

EBO Work Sessions

Retail on Demand

Sensors & Actuators

Info-based Medicine

1-on-1 CEC

Autonomic Computing

Business Trans. Outsourcing

Engineering & Tech. Services

Learning Solutions

Grid Computing

WebFountain

Blade Servers

Bus Process Integration

Dynamic Workplace

Flexible Hosting Services

Storage Software

STI Cell Processor

Product Lifecycle Mgmt

Interviews

Major Root Causes

US $1 Billion

Phase 3

Iterative/Starburst

Clusters of opportunities

Working on a portfolio $3-5B Market Potential

Phase 1

Identification

“Looking for Churn”

Within an Industry

or Across

Industries

Phase 2

Nurture an Opportunity

$1B Market Potential

Life Sciences

Linux

Pervasive Computing

Digital Media

Network Processor

e-Markets

SELECTION

CRITERIA

GRADUATION

CRITERIA

  • Strategic alignment

  • Cross IBM leverage

  • New source of customer value

  • $1B+ revenue potential

  • Market leadership

  • Sustained profit

  • Strong leadership team in place

  • Clearly articulated strategy for profit contribution

  • Early market success

  • Proven customer value proposition

Phase 4

Scale and transition all or part of the nurtured businesses

Recommendations for

Extrapolate Commonality for use in other Industries / Domains

  • Common Business needs

  • Emerging or Disruptive Business models

  • Technology Disruption

CEC, Staff, Line

Selection

Cultivation

Graduation

2000

2006

Next Phase

2006

First Graduation Summer 2003

Management System

2001

Start-up

1Q2000

Self Assessment

4Q99

Call to Action

9/12/99


A few words of context

A Few Words of Context …

  • IBM Today

    • Revenue $103B, Profit $12B, R&D $6B

    • 4 Product/Service Groups plus Sales/Distribution Unit

  • IBM in 1999

Hardware

EMEA

Asia/Pacific

Software

Services

Americas


A snapshot of the past

A Snapshot of the Past

K Employees

$220 B

400

Employees

$180 B

300

$140 B

Market Value

Revenue

$100 B

200

$60 B

100

Profit

$20 B

-$20 B

0

1985

1993

1999

2000

2001


A few fortune views of ibm

A Few Fortune Views of IBM

1984

1992


And another

And another ….


A problem in september 1999

A Problem in September 1999

“One issue looms larger and larger in our company: Why do we consistently miss the emergence of new industries?”

What should IBM do to improve its ability to successfully identify, select and pursue emerging business opportunities in a timely fashion?

Understand root causes

Recommend actions to address these issues


Ebo start up approach

EBO Start-up Approach

The Project Team did significant outside research, wrote 4 in-depth case studies, and developed over 25 mini-case studies focused on IBM’s EBO efforts.

Benchmarks

Case Studies

Caselets

  • Leading companies

  • Academic literature

  • VC Input

  • Akamai

  • ISP Market

  • Life Sciences

  • PvC

  • Business Intelligence

  • RFID

  • RS/6000 SP

  • SSD Microdrive

EBO Work Sessions

1-on-1 CEC

Interviews

Major Root Causes

Recommendations for

CEC, Staff, Line


The underlying root causes

The Underlying Root Causes

  • Our management system rewarded execution directed at short-term results and did not place enough value on strategic business building.

  • We were preoccupied with our current served markets and existing offerings.

  • Our business model emphasized sustained profit and EPS improvement rather than actions to drive higher P/E's.

  • Our approach to gathering and using market insights was inadequate for embryonic markets.

  • We lacked established disciplines for selecting, experimenting, funding, and terminating new growth businesses.

  • Once selected, many ventures failed in execution.

  • Senior management didn’t spend time on new growth opportunities


Recommended actions

Recommended Actions

  • Corporate Level

    • Adopt 3 Horizon model as overall IBM business construct

    • Define Horizon 3 cross-business domains

    • Appoint Senior Executive Leadership

    • Appoint Silicon Valley ambassador

    • Build IBM EBO management and measurement system

  • Group Level

    • Define group and business unit specific domains

    • Build appropriate EBO management system for each group

    • Lead selected Emerging Business Opportunities

    • Decide appropriate investment balance by Horizon


Emerging business opportunity

Emerging Business Opportunity

HORIZON 3

Emerging Opportunities

Test business models, prove viability, capabilities and value

Seed growth opportunities

HORIZON 2

Growth business

Scale proven business models, increase market share, & grow to opportunity

HORIZON 1

Core business

Extend, defend, increase productivity and profit contribution

Time and Level of Uncertainty

Measures

Profit

ROIC

Costs

Productivity or efficiency

High revenue growth

Market share gains

New customer acquisitions

Profit

Project-based milestones

Creating the Business Design

In market pilots

Source: Alchemy of Growth

Adopted from The Alchemy of Growth, Baghai, Coley, White


The ebo approach at a glance the essentials

The EBO Approach, at a Glance, the Essentials

  • Declare/communicate strategic intent to pursue new growth opportunities

  • Identify highly visible short list of emerging business initiatives

  • House them in the appropriate group/business unit, but give them special treatment ... gold badges

    • Dedicated A-team leadership for each opportunity

    • Active sponsorship for each by a SVP

    • Special support structure

    • Protected funding

    • Disciplined mechanisms for cross company alignment

    • Measured differently, strategic milestones

    • Regular review and oversight

  • Nurture and graduate or kill this short list, and continuously identify new candidates


Unique hybrid organizational model

Unique, Hybrid Organizational Model

Business Unit Ownership

Global

Services

Systems &

Technology

Sales & Distribution

Software

Research

EBO

Oversight, Collaboration and Issue Resolution


Ebo results

EBO Results

2004 Annual Report

2006 Analyst Briefing

New Markets

“In 2000, IBM established its Emerging Business Opportunities program to identify and nurture new lines of business. An EBO focuses on ‘white space’ opportunities that can become profitable, billion dollar businesses within five to seven years. EBOs are typically assigned an experienced IBM executive ‘champion’ to manage the venture during its startup phase ... Once an EBO has grown to sufficient size, it becomes part of an existing business unit ...”

  • Retail on Demand

  • Sensors & Actuators

  • Info Based Medicine

FY05

~$1B

>100% YTY

Business Performance Transformation

  • Business Transformation

  • Strategy & Change

  • Engineering & Technology

  • Bus Performance Mgmt Software

FY05

$4B

+28% YTY

Emerging Countries

25 EBO’s launched since 2000

5 EBO’s achieved $1B+ rev in 2003 and 2003

4 additional EBO’s doubled revenue in 2004

2 new emerging businesses launched in 2004

  • China

  • India

  • Russia

  • Brazil

FY05

$4B

+14% YTY


Ebo lessons

EBO Lessons

Call to Action, Start-up

Need a burning bridge … top level support

Thorough internal assessment of root causes

Broad senior level buy-in

Start small

Operating, Sustaining

Active senior level sponsorship

Dedicated A-team leadership for each opportunity

Disciplined mechanisms for cross company alignment

Actions linked to critical milestones

Resources fenced – and watched – to avoid premature cuts

Quick starts, quick stops

Continued evolution

Communications and connection to the business


Emerging business opportunities discussion with rpi

EBO Idea Sources Enterprise-Wide

External Sources

(Customer, VC)

Research

Sales & Distribution

Business Units

EBO Selection Criteria

Strategic alignment

Cross IBM leverage

New source of customer value

$1B+ revenue potential

Market leadership

Sustained profit potential

Benchmarks

Case Studies

Caselets

P&G

Cisco

Akamai

Business Intelligence

EBO Categories

New

Markets

New Business

Models

New/Disruptive

Technologies

Intel

ISP Market

RFID

Sun

Life Sciences

RS/6000 SP

Microsoft

PvC

SSD Microdrive

Consultant / VC Input

HORIZON 3

Emerging Opportunities

Test business models, prove viability, capabilities and value

Seed growth opportunities

Academic Literature

HORIZON 2

Growth business

Scale proven business models, increase market share, & grow to opportunity

HORIZON 1

Core business

Extend, defend, increase productivity and profit contribution

Time and Level of Uncertainty

Measures

The Portfolio

Profit

ROIC

Costs

Productivity or efficiency

High revenue growth

Market share gains

New customer acquisitions

Profit

Project-based milestones

Creating the Business Design

In market pilots

EBO Work Sessions

Retail on Demand

Sensors & Actuators

Info-based Medicine

1-on-1 CEC

Autonomic Computing

Business Trans. Outsourcing

Engineering & Tech. Services

Learning Solutions

Grid Computing

WebFountain

Blade Servers

Bus Process Integration

Dynamic Workplace

Flexible Hosting Services

Storage Software

STI Cell Processor

Product Lifecycle Mgmt

Interviews

Major Root Causes

US $1 Billion

Phase 3

Iterative/Starburst

Clusters of opportunities

Working on a portfolio $3-5B Market Potential

Phase 1

Identification

“Looking for Churn”

Within an Industry

or Across

Industries

Phase 2

Nurture an Opportunity

$1B Market Potential

Life Sciences

Linux

Pervasive Computing

Digital Media

Network Processor

e-Markets

SELECTION

CRITERIA

GRADUATION

CRITERIA

  • Strategic alignment

  • Cross IBM leverage

  • New source of customer value

  • $1B+ revenue potential

  • Market leadership

  • Sustained profit

  • Strong leadership team in place

  • Clearly articulated strategy for profit contribution

  • Early market success

  • Proven customer value proposition

Phase 4

Scale and transition all or part of the nurtured businesses

Recommendations for

Extrapolate Commonality for use in other Industries / Domains

  • Common Business needs

  • Emerging or Disruptive Business models

  • Technology Disruption

CEC, Staff, Line

Selection

Cultivation

Graduation

2000

2006

Next Phase

2006

First Graduation Summer 2003

Management System

2001

Start-up

1Q2000

Self Assessment

4Q99

Call to Action

9/12/99


Some external examples

Some external examples …


Emerging business opportunities discussion with rpi

Thank You

Mike Giersch

Vice President, Strategic Planning

IBM Corporate Strategy

[email protected]


Criteria and selection of ebo s

Criteria and Selection of EBO’s

EBO Idea Sources Enterprise-Wide

Sales & Distribution

External Sources

(Customer, VC)

Business Units

Research

EBO Selection Criteria

Strategic alignment

Cross IBM leverage

New source of customer value

$1B+ revenue potential

Market leadership

Sustained profit potential

EBO Categories

New

Markets

New Business

Models

New/Disruptive

Technologies


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