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1、Transforming to a Service Centric Business:The IBM Case Study,Michelle Kam Director, IBM Institute for Business Value 8 December 2008,|,2,Table of Contents,WHY CHANGE: Path to Differentiation and Sustainable Growth WHERE TO CHANGE: A Matter of Understanding Your Customer and Innovation THE IBM STORY
2、: From Product to Solution HOW TO CHANGE: Core Capabilities and Critical Success Factors,|,3,Three factors drive Chinese manufacturers to transform from product to service centric,Years of price war impacted Chinese manufacturers profitability RMB appreciation and rising of raw material price furthe
3、r eroded profit margin,Lack of product differentiation among manufacturers, resulting in low customer loyalty,Customers want better experience of using the product and solutions to their problem,|,4,Manufacturers could enhance customer experience, improve profitability and lock in customers by trans
4、forming to service centric,Service Centric,Product Centric,|,5,What is service centric transformation about?,Creativity: New service associated with a product, not traditional “me too ” services,Customer experience: Enhance/transform customer experience of the product,Customer interaction: Customers
5、 able to “visualise” the service, which involve human interaction with customers,Changed value perception: Customers willing to pay extra or separately for the service component, or having higher preference for the product because of the service component,Customer base expansion: Services originally
6、 provided to inhouse customers now sold to external customers; or ancillary services originally designed to help sell the product now sold separately for profit (without selling the product),5C Framework,Entering into totally new, unfamiliar service industries Ancillary services that have long been
7、provided together with the product without any change in nature and value proposition to the existing customers Services that are transparent to customers, though enhancing products value proposition (R All IGS BU are aligned by industry,Creates BIS to consolidate all consulting services, as a fourt
8、h unit under IGS,Morphs BIS into BCS with PwCC,IBM Consulting Group offers process transformation related services,IGS forms strategic alliances with SAP, JDE, Peoplesoft and Siebel.,IBM announces it is pulling out of business application development market,D Welsh is named Group VP of IGS,Gerstner
9、acknowledges OS/2 is a lost battle, diverts investments,S Palmisano is named Group VP of IGS,S Palmisano is named IBM CEO,IBM Tata, a JV is launched to position IGS to leverage Indian resources,IBM India is launched, IBM dissolves Tata JV,IGS hires 15K new employees for past 2 years in a row,Gerstne
10、r commitment for Open Standards, services benefits the most,1,Product Agnosticism,2,Separate Services Org,Services SVP becomes CEO,4,Large Scale Acquisition,3,5,Sales Channel Transformation,|,15,Summary of Gerstners Lessons Learned,“I have worked in services companies and product companies. I will s
11、tate unequivocally that services businesses are much more difficult to manage the skills required in managing services processes are very different the business model is different. The economics are entirely different. This is the kind of capability you simply cant acquire. The bet youre really maki
12、ng is on your own commitment to invest both the years and capital, then build the experience and discipline it takes to succeed”,Louis V. Gerstner, “Who Says Elephants Cant Dance”,|,16,Chinese manufacturers need to transform at three levels to become a service centric business,Business model,Operati
13、on model,People!,Strategy level,Tacit level,Execution level,Strategic intent, services portfolio, revenue model, partnership model and channel management strategy,Service aligned organization, processes, measurement and management system,Talents and skills, culture transformation,|,17,Defining an op
14、timum business model is key to successful services transformation,1. Business Model,Delivered by inhouse resource versus outsource Leverage existing channels versus set up new channels,Charge separately versus together with other products/ services One-off versus long term revenue Fixed versus varia
15、ble charge,Align service strategy with growth model and objectives Identify service opportunities and the way of integration with existing products/ services Define clear value proposition to customers,|,18,Changes to various dimensions of the operation model are necessary,Services as percentage of
16、revenue Recurring revenues from services contracts Customer satisfaction measurement,Flexible processes that incorporate customer insights and encourage collaboration across company Transformed sales process to be better deliver full impact to clients,Integrated systems to present consistent and com
17、prehensive of customers Information systems to capture and share client knowledge,2. Operating Model,Organization,Performance Measures,Processes,Systems,Strong executive sponsorship and high visibility and control An integrated and flexible organization to ensure different functions are aligned to b
18、etter serve customers Mechanism to resolve potential conflicts e.g. channel and partner,|,19,Building up talent pool in a stepwise approach,3. People,Identify leveragable physical and intellectual assets to meet customer needs Compare against competitors,Compare current capabilities with “desired st
19、ate” to identify improvement areas,Create headcount plan for the service initiatives Recruitment of experienced talent Adjust training content to be more service “desired” capability focused Training of existing employees Encourage the knowledge transfer,Service oriented and innovative culture Appro
20、priate incentive systems,“Culture isnt just one aspect of the game it is the game” - Lou Gerstner, IBM,Capability,Culture,|,20,Conclusion,Service transformation is key to manufacturing companies sustainable growth. It is critical to start the transformation now. Transformation involves deep customer
21、 understanding and innovation, and results in enhanced/transformed customer value and hence new revenue opportunities. Service transformation is a long journey that requires courage and commitment. Companies need to build the right business and operating model and execute with the right people and culture.,