Expanding the innovation horizon - the global CEO …...-Tame cultural resistance to collaboration-Establish collaborative initiatives Frequent, publicized opportunities for intra-

© Copyright IBM Corporation 2006

IBM Global Business Services

Expanding the innovation horizon - the global CEO study

Matt English & Mike Gordon5 December 2006

2



1. The CEO study context

2. Three key messages for CIOs

Agenda

3



Americas 25%

Asia Pacific 40%

Europe 35%

Overall SurveyScope: 765 CEOs and business leaders representing all major countries- 150 Financial Services CEOs participated in the

survey - 84 from Banking companies- 35% of these came from the Asia Pacific region

– equating to about 55 CEOs

Purpose: Understand the role of innovation on CEOs agenda

Innovation Definition: “New ideas or current thinking applied in fundamentally different ways resulting in significant change”

Innovation focus:- Products, Services and Markets- Business Models- Operations

Source: The Global CEO Study 2006, IBM

The Global CEO Study 2006 focussedon the CEO’s innovation agenda

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Banking CEOs are focused on product, services and markets innovation versus a more balanced approach

Innovation Area Emphasis • Product and service have typically been viewed as the way to target markets and drive growth…

• …yet, there is an growing realisation that products quickly turn into commodities…

• …leading to increased focus on closing the gap in operational and business model innovation

“…Product and services can be copied, business model is the differentiator…”

42%33%

25%

63%

20% 17%

0%

10%20%

30%

40%

50%60%

70%

Products,Services, and

Markets

Operationschange

Business &Enterprise

Models

Overall Banking

5



Source: The Global CEO Study 2006, IBM

“We need to develop a business model based on strategic partnerships that creates value for our company…and for the industry…in this era of specialization.”

Innovation Area EmphasisOperating Margin Growth in excess

of competitive peers

Products/services/markets

Operations Business Model

% C

AG

R o

ver 5

yea

rs

-1%

0%

1%

2%

3%

4%

5%

But business model innovation correlates most strongly with superior margin growth

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The challenge is that the nature of innovation is changing to be more multi-dimensional and dynamic

Innovation – Historical

R&D Product

InnovationService

Innovation

Innovation – Future

Product & Service

Innovation

Operations Innovation

Business Model

Innovation InnovationAgenda

Source: IBM, Global Business Services, 2006

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Agenda

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Three key messages for CIOs

123 Innovation can be ignited by business and technology integration

Collaboration, particularly external collaboration, is indispensable

Deep business model innovation is critical

“CEOs do not seem intimidated or content simply to cope…[Instead they see change] as both reason and license to expand their innovation horizon…”

CEOs are embracing change —

Source: IBM Global CEO Study 2006

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Deepen business understanding through componentization

IBM Component Business Modeling™ (CBM) Breaks down the operation into its component processes- Determines the core strengths that differentiate and provide the greatest

business value- Enables companies to look at the business through a uniquely different

lens

Identifies opportunities for improvement- Via process enhancements or outside partnerships

Increases process flexibility Strengthens integration across processesEnables business and IT communities to work together

1

10



Component Business Modeling for the organisation

Maps the entire business on a single page- People, processes and technology- Strategic, financial and transformational views

Shows how well business priorities are being met- Identifies deficiencies and opportunities for

improvement

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CBM and SOA help close the gap between business and IT

ComposableServices

(SOA)

Flexible BusinessTransformation

Business Process OutsourcingMergers, acquisitions and divestitures

Flexible ITOn demand Operating Environment

Software Development

Integration InfrastructureManagement

Requires

Development Infrastructure Management

Service-oriented architecture (SOA)

ComposableProcesses

(CBM)

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IT Service Management (ITSM) —built on the SOA foundation

Integrate people (IT roles), IT processes, and systems management resource data

across SOA applications

Monitor ITSM processes and SOA applications

Automate ITSM best practices (ITIL) and policy-based

management

Model and simulate ITSM processes for process

improvement while capturing the requirements and planning

aspects of ITSM

Implement and customize process models through

assembly of service components

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Collaboration, particularly external collaboration, is indispensable

What CEOs told us…Over 75 percent ranked collaboration and partnering as very important to innovationEmployees are the top source of innovative ideas, followed closely by business partners and customers- Ideas are increasingly coming from

external sources

What we found…Extensive collaborators outperformed their peers in both revenue growth and average operation marginCompanies that used external sources more often reported higher revenue growth than those that didn’t

2

Academia

Associations, trade groups, etc.

Competitors

Consultants

Customers

Business partners

4020 30100

Internal R&D

Internal sales or service units

Employees

Most significant sources of innovative ideas*

* Respondents could select up to three choices

Percent of respondents

Internal sourcesExternal sources

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Collaboration is essential, yet there is a gap between importance and practice

• “…we need to develop a business model based on strategic partnerships that create value not just for the company but also for the industry as a whole; we cannot do everything in this era of specialization…”

• “…key for success will be focus on core competencies and rapidly form intelligent partnerships…”

Banking CEOs on Importance of Collaboration

76%

52%

64%

23%

Collaborationof Significant

Importance

SignificantExtent of

Collaboration

Overall Banking

Collaboration Gap

Collaboration Importance versus Extent

% o

f res

pond

ents

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How can CIOs help close the collaboration gap?

Collaborativetechnologies

Technology barriers

Incompatible data definitions

Open standards and architectures

Security concerns

Proprietary standards and architectures

Insufficient capacity or scalability

Virtualized resources

Teamworkspaces

Web conferencing

Blogs, Wikis

Leverage collaborative technologies and remove barriers

Instant messaging

Data mining/federated database

Firewalls

SOAs

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Make collaboration easier —and an expected way of doing business

Create the right climate - Encourage employees, customers and potential

partners to share ideas- Tame cultural resistance to collaboration- Establish collaborative initiatives

Frequent, publicized opportunities for intra- and inter-organizational collaboration

Work with other company leaders to make collaboration part of business strategyBring knowledgeable groups of individuals together- Encourage employees to think horizontally,

beyond silos and company wallsReward innovative ideas resulting from collaborative endeavors

Collaborative innovation infuses

ideas that can energize an

entire organization

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Banking CEOs also recognize the importance of the integration of business and technology

• “…integration of business and technology is critical..”

• “…there are few, if any, processes that are not totally dependent on technology…”

• “…technology is critical as a prerequisite, innovation required to generate value…”

Banking CEOson Importance of Business and

Technology Integration

Integrationof Significant

Importance

SignificantExtent of

Integration

Overall Banking

Collaboration Gap

Business and Technology Integration Importance versus Extent

81%

61%

86%

46%

% o

f res

pond

ents

3

18



CIOs are in the driver’s seat for technology and business integration

Be a business executive first, a technologist secondTake the lead in closing the gap between business and ITMake business strategy an IT priorityCombine a deep understanding of business issues with knowledge about current and emerging technologies- Implement technology to suit changing business

requirements- Ensure technology has an important place on the corporate

agendaActively cultivate an entrepreneurial atmosphere in which business and technology integration occur naturallyHelp the IT organization attain needed “hybrid” skills

Technology

Business

Integration

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Become part of a new governance structure

Integration of business and IT leadershipStakeholders from business and ITShared responsibility for:- Setting IT direction- Use of IT across the business - Implementing strategic initiatives- Managing IT investments across their lifecycle- Establishing and enforcing standards and policies

that oversee business/IT integrationBetter equips IT to make decisions appropriate for the business

When IT functions as part of the business, business model

innovation can thrive

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CIOs figure prominently in the expanding innovation horizon

Drive business model innovation

Enable internal and external collaboration

Ignite technology and business integration

Remove technological barriers

- Facilitate information sharing

Fully leverage collaborative technologies

- Make collaboration easier and expected

- Reward innovative thinking

Innovate the IT business model first

- Become customer-centric- Become a credible

business partner- Use componentization

techniques to deepen business understanding

Create a flexible, responsive infrastructure

- Open architectures, virtualization and more

Be a business executive first, technologist second

- Close the gap between business and IT

- Build hybrid skill sets among the IT community

- Promote a new governance model

- Melds business and IT leadership together

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Agenda



Expanding the innovation horizon - the global CEO study

Matt English & Mike Gordon5 December 2006

Documents

Expanding the innovation horizon - the global CEO …...-Tame cultural resistance to collaboration-Establish collaborative initiatives Frequent, publicized opportunities for intra-