MEET THE VISIONARIES
MEET THE VISIONARIES Creating Competitive Advantage in the CE Industry George Bailey General Manager – Electronics Industry - IBM George Bailey is the General Manager of the electronics industry. In this role, Mr. Bailey is responsible for managing almost billion of IBM’s business within the Electronics industry, which encompasses clients in the consumer electronics, semi-conductor and contract manufacturing sectors, among others. Mr. Bailey leads a global network of nearly 5,000 IBM employees focused on Electronics industry clients, and the development of business and technology solutions that meet industry needs. An internationally recognized authority on strategic change, Mr. Bailey has led large-scale, multi-year transformational projects for progressive U.S., European and Asian companies, across a variety of industries, for two decades. Most recently, he led the Program Management Office that supports the postmerger integration of PwC Consulting and IBM. Mr. Bailey has appeared on national as well as local television and radio business programs, including CNBC- TV’s “Power Lunch,” and has been frequently quoted in The Wall Street Journal, Fortune, Industry Week and other management publications and newspapers. Mr. Bailey is the author of Irresistible! Markets, Models, and Meta-Value in Consumer Electronics and A Thousand Tribes: How Technology Unites People In Great Companies. George Bailey will be keynote speaker at IFA on the 1st of September. As a foretaste of his presentation, IFA International brings you this interview with him. Below is an extract from the interview, which may be heard in its entirety via podcast by clicking on the link below. IFA International: It is becoming evident that companies need to evolve and adapt to the changing marketplace in order to thrive. What do you believe provides the competitive advantage today? I think the conditions for competitive advantage have really shifted in this industry. In the old days, technology and production quality were the hallmarks of success. If great engineers could design a good product and produce it for an adequate price it would have an advantage and make it to the market. While that engineering focus was once the hallmark of success it is now the harbinger of failure. In fact if what you're doing is focusing exclusively on production and engineering, you'll end up with products that have no market or which produce no value for your company because the channel will steal the margin. You see this every single day in companies that produce outstanding products, that push them through retail channel and end up with two of three percent margins and quite honestly you're not going to be able to create enough return for shareholders to be able to justify investment like that! So if it's not production engineering any more (which are of course important and you have to do them) then what is? One its innovation of your business model... finding new ways to make money. One way in which this is frequently done today is developing new channel strategy. This is very hot. There are dramatic, revolutionary changes in how people go to the market today with web 2.0 technology. The answer to today's problem is not developing yet another MP3 player with a different form factor and new style... it's KEYNOTE DATE AND LOCATION : 01.09.2007 3:00 – 3:45 p.m. Hall 7.1a, IFA International Keynote Area Title: Powered by IBM - Innovative CE Business Models through Technology Collaboration. Mr. George Bailey (General Manager of IBM's Global Electronics Industry) will outline the major trends impacting the consumer electronics (CE) industry and the actions CE companies must take to remain relevant in the global marketplace. Clearly, traditional business models are not adequate for sustainable success, and companies must embrace a new set of strategies. The convergence and integration of technologies, devices, web-based services and content is changing the customer experience, new products must provide more than mere interoperability and synergy but must deliver customer-centric solutions. Mr. Bailey will describe how technology collaborations and partnerships enable companies to extend the reach of their in-house innovation capabilities, and how new models for doing cross industry business can strengthen both customer and partner relationships. Mr. Bailey will also share IBM's technology forecast and discuss its relevance to the CE industry. developing a new innovation in the business model. It's like the Apple story. The real innovation for Apple was not the technology, but the design of the business model... the idea of packaging content along with the device and the service. What was interesting about this is it’s over half a decade old, and in an industry where every technical development is copied within months if not weeks, it's been more than five years that no one has been able to copy the Apple business. They’ve created a competitive advantage by the business model and they have held on to it for a long time. So that's the first way to get competitive advantage. Another is through focusing on customer value as opposed to engineering and technology. The companies that really understand their customers’ wants and needs directly and come up with innovative solutions that create true value are the ones that will win. When we published our book last year we coined a term “meta-value” and the way we described it was that it's not “synergy” which is one plus one equals three ... everyone knows that... it's something that says when you take two atoms of hydrogen and combine them with one oxygen atom you don't get three atoms, you get something brand new. What you get is a property called “wet” and what's interesting about that is that hydrogen isn’t wet and neither is oxygen, but when you put them together in the right combination, you get a very valuable property that's essential to all life! Transferring that metaphor to electronics, when you combine service, device and content for example to create a whole new value proposition. You see that with medical device makers when they try and develop an approach that combines the accumulated wisdom of doctors around the world with incredible monitoring devices that are embedded in the home and so forth. It creates real value, and when you do deliver that real value, you get a premium and a competitive advantage. Click here for AUDIO PODCAST 20 IFA International • Friday, 24 th August 2007
SPOTLIGHT : IBM SURVEY Internet Catches TV as Prime Entertainment Source IBM has released the findings of a global consumer survey that shows the TV and the Internet are truly on equal footing as entertainment sources. Global Study The IBM Institute for Business Value survey of more than 2,400 households in the United States, United Kingdom, Germany, Japan and Australia covered global usage and adoption of new multimedia devices and media and entertainment consumption on PCs, mobile phones, portable media players and more. The global findings overwhelmingly suggest personal Internet time rivals TV time. Among consumer respondents, 19 percent stated spending six hours or more per day on personal Internet usage, versus nine percent of respondents who reported the same levels of TV viewing. 66 percent reported viewing between one to four hours of TV per day, versus 60 percent who reported the same levels of personal Internet usage. To effectively respond to this power shift, IBM sees advertising agencies going beyond traditional creative roles to become brokers of consumer insights; cable companies evolving to home media portals; and broadcasters and publishers racing towards new media formats. Marketers in turn are being forced to experiment and make advertising more compelling, or risk being ignored. “Consumers are demonstrating their desire for both wired and wireless access to content: an average of 81 percent of consumers surveyed globally indicated they’ve watched or want to watch PC video, and an average of 42 percent indicated they’ve watched or want to watch mobile video,” said Bill Battino, Communications Sector managing partner, IBM Global Business Services. “Given the rising power of individuals and communities, media and entertainment industry players will have to become much better at providing permission-based advertising and related consumer-driven ratings services." The steady growth of consumer adoption of digital music, video, and other entertainment services – though markets are still small by comparison to traditional media -- show households are no longer “one size fits all,” and content providers and marketers must follow suit. 23 percent of respondents reported using a portable music service (e.g., iTunes); seven percent reported having a video content subscription for their mobile phones; 11 percent reported a PC-based music service; and 18 percent reported an online newspaper subscription. Saul Berman IBM Media & Entertainment Strategy and Change practice leader said, “The Internet is becoming consumers’ primary entertainment source. The TV is increasingly taking a back seat to the cell phone and the personal computer among consumers age 18 to 34. Just as the ‘Kool Kids’ and ‘Gadgetiers’ have replaced traditional land-lines with mobile communications, cable and satellite TV subscriptions risk a similar fate of being replaced as the primary source of content access.” Television Viewing Shifts In the largest digital video recorder market, 24 percent of U.S. respondents reported owning a DVR in their home and watching at least 50 percent of television programming on replay. Surprisingly, 33 percent in the U.S. reported watching more television content than before the DVR. More than twice as many U.K. consumers surveyed use video on demand services than own a DVR, and less than a third of U.K. consumers have changed their overall TV consumption as a result of DVR ownership. In Australia, despite owning a DVR, most respondents prefer live television or replay less than 25 percent of their programming. Online Content Trends Consumers are increasingly contributing to online video or social networking sites: nine percent of German and seven percent of U.S. respondents claim to have contributed to a user-generated content site; 26 percent of U.S. respondents reported contributing to a social networking site. While the numbers were slightly less from other countries like the UK (20 percent) and Japan (9 percent), they are also significant. Australia topped all countries surveyed with 36 percent contributing to social networking sites and nine percent contributing to video content sites. Of those who contributed content, an average of 58 percent worldwide did so for recognition and community, not monetary gain. Mobile Content Trends In the UK, nearly a third of users who watch mobile TV reduced their standard TV set viewing patterns as a result of new mobile device services. 18 percent said they reduced “normal” television by a little and another eight percent reduced “normal” television by a lot; four percent substituted television on their regular TV with their new device altogether. For respondents in Germany who had watched mobile video, 23 percent prefer to view user generated content, and 21 percent prefer video trailers or promotions. About the survey Conducted from mid-April through mid-June 2007 by the IBM Institute for Business Value, the questionnaire covered 38 questions and generated 885 respondents in the US, 559 respondents in the U.K., 338 respondents in Germany, 263 respondents in Australia and 378 respondents in Japan. Respondents reported a range of household salary levels, though the vast majority was under US 0,000. This consumer study is a component of the upcoming report “The end of advertising as we know it”, co- authored by Saul Berman and Bill Battino, planned for the Autumn. It is the latest in a series of thought leadership papers including “The end of television as we Copyright IBM Corporation 2007 know it”, “Navigating the media divide: Innovating and enabling new business models” and “Beyond access: Raising the value of information in a cluttered market”, providing recommendations for broadcasters, advertising agencies and media distributors including telecom-munication and cable companies. As part of its ongoing consumer research efforts, IBM is making the full survey results available for free download at: www.ibm.com/media/adsurvey07 IFA International • Friday, 24 th August 2007 21
