The rise of the digital business ecosystem presented at NEMODE community meeting July 2013

1. 1
Digital Disruptives
The rise of digital business ecosystems
@jeremycaine
#nemode2013
© 2013 IBM Corporation

2. 2
DigitalDigitalDigitalDigital
FirstFirstFirstFirst
Source: Google

3. 3 Source: IBM

4. 4

5. 5
1995
2013

6. 6

7. 7
Net Promoter Stars by Sector
2136TripAdvisorTravel Websites
4170Apple iPhoneSmartphones
4369Amazon.comOnline Shopping
2750Netflix OnlineOnline Entertainment
929Brighthouse NetworksInternet Service
4180USAAHome Insurance
1235KaiserHealth Insurance
6278CostcoDepartment / Speciality Stores
2546American ExpressCredit Cards
1556VerizonCable / Satellite TV
2978USAABanking
4176USAAAuto Insurance
3066SouthwestAirlines
Industry AverageTop Firm NPSLeading CompanyIndustry
Source: Satmetrix 2013 Net Promoter Benchmark Study of US Consumers

8. 8
In the past customers came to do transactions with
businesses over a variety of their channels
Systems of Record
Web Phone Branch
Systems of Record
Web Phone Branch
Systems of Record
Web Phone Branch
We built multi-channel
capabilities atop our
Systems of Record
© 2013 IBM Corporation

9. 9
Technology and societal changes have brought about omni-
channel behaviour from customers
Now we are building
Systems of Engagement
to serve the empowered
consumer
Systems of Record Systems of Record Systems of Record
Systems of Engagement Systems of Engagement Systems of Engagement
Social
Chat
Tablet
Smartphone
Web
Telephone
Physical WorldSmart TV
Augmented
Reality
© 2013 IBM Corporation

10. 10
A convergence of key technologies is enabling this change
SocialMobile
CloudAnalytics
AppApp
Location
UI simplicity
Camera
Accelerometer
Any-to-many-to-one
Gamification
Unstructured Data
Massive content
New Processing
Visualisation
Open Data Sets
Software service
API
Security
© 2013 IBM Corporation

11. 11
BusinessBusinessBusinessBusiness
ModelModelModelModel
ThinkingThinkingThinkingThinking
Source: businessmodelgeneration.com

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The Stand Out digital businesses have similar characteristics
Adjacency
New product, service or market
Geographic expansion
Differentiation
Elicit market segment from data
Myth of the Average Customer
Scaling Ecosystems
Third party collaborators
Automated contractual relationships
Dynamic Operating Model
Business Platforms, software ecosystems
Cloud computing service infrastructure
Source: Elastic Enterprise, Vilatari and Shaughnessy

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What business model direction do you need to take?
Disruptive
Non-core industry
Novel use of technology
New monetisation models
INDUSTRYTARGET
PRODUCT / SERVICE
Core
Existing Competencies
Existing market
Traditional
Physical products
Multi-channel service
Transaction revenue
Digital
Instrumented / Digitised
Data influenced usage
Reciprocal revenues
© 2013 IBM Corporation

14. 14
The rules of successful* companies over the last 44 years
Source: Harvard Business Review, April 2013
* Performance measured using Return on Assets (ROA); n = 25,453
1
2
Better before cheaper
Complete on differentiators other than price
Revenue before cost
Prioritise increasing revenue over reducing costs
Business Model = Value Creation + Value Capture

15. 15
Value Creation – Price or Non-Price?

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Analysing Hassle Maps can help identify the technology and
organisational change that can enable Value Capture
Go to Video
Store
Choose Video Take Home Watch Video Forget Video
Take Video
Back
Pay Late Fee Get Another
Go Online Choose Video Post Delivery Watch Video
Keep as Long
As You Want
Easy Post
Back
Mechanism
No Late Fees Get Another
Wish list
matched to
available
stock
Strategically
geographic
distribution
centres
Envelope
designed to
not be mail
exception
The Killer
Punch
Source: Demand, Slywotzky and Weber

17. 17
Your data
on them
Their data
shared
Outside data
influencing
insight
Transactions
History
Personal details
Net worth
World events
Real-time
Capitalise
React
What’s happening?
Opinion
Self-promotion
Information sharing
Data is the new landfill
© 2013 IBM Corporation
Data driven business models – we have passed the tipping point of
volume and ability to analyse in real time

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18
Figuring out new business models is not necessarily obvious
© Foursquare Labs

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Digital Business Model
Source: MIT Sloan Management Review, Weill

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EcosystemEcosystemEcosystemEcosystem
EvolutionEvolutionEvolutionEvolution

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BusinessBusiness Business
Platform
Business
Platform
Disruptive
Business
Platform
Disruptive
Business
Platform
Products & Services
Capabilities
Costs, profits
Strategies
Revenue streams
Capability
enhancement
Technology
enablement
Processing efficiency
Increase straight-
through processing
Per-click business
models
Integrated Product-
Service systems
Value creation and
market control
Multi-sided business
models
Open connectedness
to partners and
suppliers
Depending on your legacy starting point technology led business
platforms are the foundation for becoming a Digital Disruptive
© 2013 IBM Corporation

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Digital Disruptives are building digital business models
that are exploiting new technology capabilities
Value Chain Ecosystem
Complete
Partial
KNOWLEDGEOFENDUCSTOMER
BUSINESS DESIGN
Ecosystem Driver
• Open platform based on current
reach or brand
• Greater customer experience
• Uses customer knowledge to
match needs with providers
• Core skills: extracts “rents”,
exploits knowledge of customer
Examples: Amazon
Omni-channel
Business
• “owns customer
relationship
• Telecom
Modular Producer
• Creates plug and play products
and services
• Adapts to any ecosystem
• Core skills: constant innovation of
product and service
Examples: Paypal
Omni-channel Business
• “owns” customer relationship
• Provides multi-product customer
experience
• Core skills: integrated value
chain, cross-sells
Examples: USAA, CBA, Sears,
France Telecom
Supplier
• Has potential loss of power
• Core skills: low-cost production,
incremental innovation
Examples: insurance via agent,
electronic producer via retailers
Source: MIT Sloan CISR
© 2013 IBM Corporation

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business ecosystem =
interacting organisation and individuals
producing products / services
integrating customers
ecosystem leader
mutual goals
^^^^
digitaldigitaldigitaldigital
via technology
platform provider
virtual and / or physical
web, devices, things
monetisation
Digital Disruptives are re-shaping the economy with their digital
business ecosystems
© 2013 IBM Corporation

24. 24 © 2013 IBM Corporation
Design for a Digital First experience
Build for differentiation and value capture
Data at the heart of the business model
Instrument, gather, exploit
Automate and Connect
Scale and open up the operating model