This document discusses building effective inside-out ecosystems to disrupt existing markets and create new ones. It proposes an approach called the InsideOut Ecosystem that integrates digital business models, organization, and infrastructure to drive value creation through collaboration. The approach involves designing the digital business model, building a smart service organization with dual management structures, providing a digital team platform infrastructure, and accelerating ecosystems. The goal is to leverage existing engineering strengths in Germany to transition to more digital and platform-based business models focused on smart services in order to better compete internationally and preempt new digital competition.

1. Paul.Gromball@tmg-muenchen.de1July 2016
Creating the
learning Enterprise
Industry 4.0
Smart Services
The TMG Approach
-for discussion-
Building effective InsideOut Eco-systems
to disrupt existing markets and create new ones

2. 2
Content
1. The InsideOut Ecosystem Approach
2. The Digital Challenge
3. Pre-empting the Digital Competition
4. Disrupt inside out : making it happen

3. The InsideOut Ecosystem
Value Proposition
3
For Companies who want to build Smart Services,
the InsideOut Ecosystem integrates digital business
models, organization and infrastructure which
drives dynamic value creation through the unity-of-
effort of smart talents

4. 4
Design, enable and build the InsideOut Ecosystem
The TMG Approach
Value Creation by
Information & Knowledge
The Platform Business System
• Resource orchestration: Unity-of-effort
• Cross-boundary interaction: Demand & Supply Roles
• Focus on ecosystem value: Smart Service Growth
VALUE-UNIT
Boundary to
Market
External
Digital Team
Central Smart
Services
Roles
Internal
Digital Team
MARKET
• Customers
• Competition
• Stakeholder
• Society… PERIPHERY
CENTER
Supply
Demand
Phase I
Phase II
Supply
Inside Out Ecosystem Solution
Front-
Line Roles
Demand
• Governance System
• Joint Consciousness
• Empowered Execution
• Company Standard Platform
• Cloud-based TMG Platform
The Digital Team Platform
1 2
3
Design Enable
Build

5. 5
The Digital Team Advantage
Freeing Knowledge Resources for value-creating Activities and Growth
Resources
(costs,emailtime..)
Cooperation
Management-driven Hierarchy
Digital Teams
The Effect on Business Performance
Digital
Transformation
Time-Reduction
30 -50%
Speed
Fast Responses
Reduction of
non-value added expenses
25 -30%
Efficiency
Work Productivity
Additional Value-Creation
by Cooperation between “Boxes”
20 -25%
Growth
Collective Creativity
Limits of Growth: Knowledge Resources
Growth Effect

6. 6
Content
1. The InsideOut Ecosystem Approach
2. The Digital Challenge
3. Pre-empting the Digital Competition
4. Disrupt inside out : making it happen

7. The Digital Challenge:
Germany as an international player has key engineering strengths –
Pressure to do move to digital Business Models continues to grow
7
Relative German Strength vs. USA & China
highlow
FutureBusinessImportance
high
low
International Benchmark Result of
acatech Digital Performance study
Key Strengths
• Engineering
Capability
• Importance of
Production
• Sustainability
• No focus field • No focus field
Source: Industrie 4.0 Internationaler Benchmark, Zukunftsoptionen und Handlungsempfehlungen für die Produktionsforschung; acatech
?
Growing Pressure
1. Business Models
2. Organization
3. Infrastructure
4. Digital Talent

8. 8
Digital Leadership Implication:
Focus narrowly on product-centric market leadership is no longer a viable option
Capturing
Digital Potential
with…
8
The Value Ecosystem
Outside Value Creation by
Information & Knowledge
The Value Chain
Inside Value Creation by
Material & Energy
Source: acatech
The Platform Model
Value-unit
The linear Business Model
Smart Service
Smart Data
Smart Products
Smart Infrastructure
Smart Talents
Digital Business Layer Framework
Optimization of new
business processes and
product features
New Business
Models by adding
communities and
network effects
The Digital Value-Creation Model
The Emergence of the hybrid Digital Business Model
? How to leverage the strength in
process and product engineering ?
Lead:
Lead:

9. 9
Germany is leading the linear Business Model Paradigm
Source: Siemens
Digital Space Physical Space
Digital Space Physical Space
Industry 4.0 Assembly Industry
Industry 4.0 Process Industry
Value Creation by
Information & Knowledge
Value Creation by
Material & Energy
Value Creation by
Information & Knowledge
Value Creation by
Material & Energy
Industry 4.0: The Digitization of the product support-based business models

10. 10
Competition moves from Products to Platforms :
US Smart services start-ups are unleashing a wave of disruptive
business model innovations
Smart Products Smart Service
Year: 1916
Empl: 116,000
Mkt Cap: 53B
Traditional Business
Year: 2009
Empl: 5,000
Mkt Cap: 60B
New Business
Transformation of Business Models
Example Mobility
Hard Assets Soft Assets
Whoever controls the service platforms will also gain control of the entire value chain…
…the global race for control of the data and platforms is already truly underway…

11. 11
The German Business Model Trap:
German companies appear to be “trapped” by their product support-
based business models
Source: acatech
The linear Business Model
Value Net
Design & Engineering
Value Net
Service
Focus Smart Products/Industry 4.0
Focus Smart Services
Product support-based Smart Services are
not very profitable at present
The German product-centric Business Model
Digital Focus today: Optimize and increase the efficiency of existing processes

12. New Competition is driven by hybrid Digital Business Models
Blending of Smart Products and Smart Services creates new competitors
Smart Product Smart Service
12
We have seen this before in the Handset Market: Apple vs Nokia/Blackberry

13. 13
Content
1. The InsideOut Ecosystem Approach
2. The Digital Challenge
3. Pre-empting the Digital Competition
4. Disrupt inside out : making it happen

14. 14
Pre-empt the new competition by Disrupting Inside-out
Leverage Industry 4.0 Smart Services Development by integrating the
Business Model, Organization, Infrastructure & Talents
Disrupting Inside-Out Framework
Business Model
Organization Infrastructure
Smart Talent
Ecosystem
1
2 3
4
Disrupting Inside-Out Approach
Smart Service
Idea
People
(Customer)
Smart
Products
Smart
Services
The Internet
of Things,
Service &
People
(IoTSP)
Industry 4.0 Elements
From passive targets…
to dynamic networks
Shift

15. The Disrupting Inside-Out Ecosystem Building Blocks
15
Business Model: Hybrid Solution Organization: Dual Management
Infrastructure: Digital Team Platform Smart Talent: Global Ecosystem
1 2
3 4
Creating Smart Services with four Ecosystem Building
Blocks to disrupt existing markets and create new ones
The Value Ecosystem
Outside Value Creation by
Information & Knowledge
The Value Chain
Inside Value Creation by
Material & Energy
Smart Products Smart Services
Linear Business Model Platform Business Model
Smart ServicesSmart Products
Management-driven hierarchy Leadership-driven network
+
+
Lead Lead
Smart Services Smart Services

16. 16
Building the disrupting InsideOut Ecosystem
The simultaneous development of business model, organization,
infrastructure and smart talent is key success factor
Integrated Smart Service Development Outcome: Value Based Customer Service
Source: Nike
Best Practice Disrupting Inside-Out Example: Nike Digital Sport
Smart
Products
Smart
Services
People
(Customer)

17. 17
Content
1. The InsideOut Ecosystem Approach
2. The Digital Challenge
3. Pre-empting the Digital Competition
4. Disrupt inside out : making it happen

18. 18
Typical Digital Team areas:
• High degree of creative work
• Global business areas
• Cross-boundary work
• Large basic processes
• Areas with knowledge gaps
Accelerate
Eco-
Systems
Build the
Smart
Service
Organization
Provide
Digital
Team
Platform
Generate
Smart
Service
Ideas
Design
Digital
Business
Model
The InsideOut Ecosystem building process
1 2 3 4Start here
Disrupt inside out : making it happen
Leveraging the Capabilities of the Disrupting Inside-Out Framework to
accelerate the Smart Service Strategy Execution
Design Thinking Iteration

19. The Smart Service Strategy: Pipeline of competitive advantages
Start here:
Generate Smart Service Portfolio as “Market of ideas” around the Customer
Smart Service Portfolio:
The Market of Ideas around the Customer
Example
19
Generate
Smart
Service
Ideas
Start here
Context of Smart Services
Smart Services Portfolio
ActivityLevelofSmartServices(Countries)
XY
Revenue Potential
(Non)Customer Pain
Art of the Possible
Smart Service Idea

20. 20
Step 1: Design the Digital Business Model
The Smart Service Growth Engine
Job-to-be-done Sphere
Sales
(+)
Compensates
Creates Connects
Consumes
Smart Service Business Model: The Platform
VALUE-UNIT:
Smart Services
Company Team
Digital Team Platform
2
Customer Team
Supply
Demand
Design
Digital
Business
Model
1
Art of the Possible (Non)Customer Pain

21. 21
Step 2: Build the Smart Service Organization
The Dual Management System
Build the
Smart
Service
Organization
2
80%
20%Task X
Management-
driven hierarchy
Smart Products Smart Services
Efficiency & Excellence
Social
Marketing
The Value Chain: Nike Example
Digital
Product
Design
Customized
Manufacturing
Adaptability & Innovation
The Value Ecosystem: Nike Example
Cross-functional Community
• Digital marketing
• Digital product innovation
• Digital commerce
• Digital Technologies
• Customer analytics
The hierarchy-network dualism of the organization
Smart Talents
Smart Talents
Leadership-driven
network

22. 22
Step 3: Provide the Digital Team Platform
The Infrastructure as third Operating Dimension
Provide
Digital
Team
Platform
3
The enabling Infrastructure Dimension
Self-Organized
Creator:
Innovation
Digital Team Platform
Smart Factory/ERP
1
2
3
• Transparency
• Cooperation
• Feedback
• Learning
• Coordination
Digital Leadership-
driven network
Smart Service
Work 4.0
Management-
driven hierarchy
Doer:
Duplication
Controlled
Role of the employee
Company
Infrastructure
Smart Products
Industry 4.0
GovernanceSystem

23. 23
Step 4: Accelerate Eco-Systems
Accelerate
Eco-
Systems
4
Inside-out scaling of the Digital Team-of-Teams Governance
Governance:
Weekly
Activation
Sessions
Doing
Work in
clear roles
I) Empowered
Execution
to act on tensions
II) Joint Consciousness
on achieving the goalsJob-to-be-done
Tension drives progress
Community
Integrator
Sensing Tension
as Challenges or
opportunities
Governance
System
The Goal Lead measures
The Eco-System: Team-of-Teams
Digital Team Platform

24. 24
Build new Smart Services
(Example)
Outcome:
Integrated Smart Service Development is key factor of success
Patient
Demand
Supply
Non-Consumer
Value Based Health Care
Smart Service Platform
Disrupting InsideOut Process
From 5% market-
penetration to
25%…

25. 25
The Advantage of Smart Service Value Creation:
Smart Service Business Models create Growth and Profit
Source:Kim, Chan et al: Blue Ocean Strategy, Harvard Business School, 2015
Base: 150 global companies in 30 industries
Initiatives
Revenue
Impact
The Profit and growth consequences of Smart Services
Profit
Impact
Smart Product Initiatives Smart Service Initiatives
86 % 14 %
62 % 38 %
39 % 61 %
Capturing Smart Service Business Model Potential : US Perspective
People
(Customer)
Smart
Products
Smart
Services
The Internet
of Things,
Service &
People
(IoTSP)
From passive targets…
to dynamic networks
Industry 4.0 Elements
LeadLead

26. 26
Automotive Engineering
Other Industries
Technology Management Group Profile
Competences
- Internet Driven Strategic Changes
- Business Development
- Accelerating Innovation Process
- Mobilizing People in Networks
Facts
Office: München
founded 1987
TMG helps companies create, build and launch new digital initiatives from within their organization