The document discusses the increasing importance of collaboration in global supply chains. It notes that product innovation alone is no longer sufficient, and operational and business model innovations are becoming more difficult to achieve. Extreme collaboration across organizations is now required to compete successfully. The document provides examples of collaborative efforts in the electronics industry, such as between IBM, Sony, and Toshiba in developing computer chips. It argues that information sharing and joint planning are now core strategies rather than optional activities.

1. Global Business Services
Keynote Address:
Collaboration Goes Critical
Electronics Supply Chain Association
© 2007 IBM Corporation

2. Global Business Services
Getting down to business: First bold prediction
Really Big
Average LCD Screen Size in Consumer Household
82 cm
28 cm
2.5 cm
1987 1997 2007 2017
2 Supply Chain Strategy © 2007 IBM Corporation

3. Global Business Services
Getting down to business: First bold prediction
Really Big
Average LCD Screen Size in Consumer Household
82 cm
28 cm
2.5 cm
1987 1997 2007 2017
3 Supply Chain Strategy © 2007 IBM Corporation

4. Global Business Services
Second bold prediction
16
Average Number of Remote Controls
per Consumer Household
7
3
1
1987 1997 2007 2017
4 Supply Chain Strategy © 2007 IBM Corporation

5. Global Business Services
Second bold prediction
16
Average Number of Remote Controls
per Consumer Household
Omnipotent
Universal Universal 2 Universal 3
7
1 2 3 4 5 6 7 8 9 10 11 12
3
1
1987 1997 2007 2017
5 Supply Chain Strategy © 2007 IBM Corporation

6. Global Business Services
How do we come up with these brilliant insights?
Experience 3
CEO CE Industry as
Interviews + Research + Electronics
= Current
Player Realities
6 Supply Chain Strategy © 2007 IBM Corporation

7. Global Business Services
3 current realities
Product innovation is important,
1 but it is not enough
Operations & business model innovations are
2 becoming harder to execute
Extreme collaboration is required to compete
3 and succeed
7 Supply Chain Strategy © 2007 IBM Corporation

8. Global Business Services
3 current realities
Product innovation is important,
1 but it is not enough
Operations & business model innovations are
2 becoming harder to execute
Extreme collaboration is required to compete
3 and succeed
8 Supply Chain Strategy © 2007 IBM Corporation

9. Global Business Services
Everyone thinks they’re an innovator
Industry Position for Innovation in
Products and Services
Clear Innovation
68%
Leader
Fast Follower 11%
Moves with Peers 11%
Follows Peers 11%
0% 10% 20% 30% 40% 50% 60% 70%
Respondents
Source: The Global CEO Survey 2006
9 Supply Chain Strategy © 2007 IBM Corporation

10. Global Business Services
To some extent, that’s actually true
COMPANY PATENTS
IBM 3,621
Samsung 2,451
Canon 2,366
Matsushita (Panasonic) 2,229
HP 2,099
Intel 1,959
Sony 1,771
Hitachi 1,732
Toshiba 1,672
10 of top 10 companies
Micron Technology 1,610 filing patents are in
electronics
Source: US Patent and Trademark Office – 2006 top 10 list
http://www.uspto.gov/go/oeip/taf/topo_06.htm#PartB
10 Supply Chain Strategy © 2007 IBM Corporation

11. Global Business Services
But not
always:
Assignee:
Armonk, New York
December 11, 2001
11 Supply Chain Strategy © 2007 IBM Corporation

12. Global Business Services
A lot of our “innovation” is product in search of a
problem. Case in point: internet TV
12 Supply Chain Strategy © 2007 IBM Corporation

13. Global Business Services
Operational and business model innovation are collectively
equal to product innovation, CEOs tell us.. and we agree..
Innovation Area of Most Importance
Operations 26%
Business and Enterprise 31%
Models
Products, Services and 43%
Markets
0% 10% 20% 30% 40% 50%
Respondents
Source: The Global CEO Survey 2006
13 Supply Chain Strategy © 2007 IBM Corporation

14. Global Business Services
Operational and business model innovation
defined…
Revenue Enterprise
Industry Model
Model Model
Innovation
Innovation Innovation
Change how Change how Change how
industry is revenue is products &
defined generated services are
delivered
14 Supply Chain Strategy © 2007 IBM Corporation

15. Global Business Services
3 current realities
Product innovation is important,
1 but it is not enough.
Operations & business model innovation are
2 becoming harder to execute
Extreme collaboration is required to compete
3 and succeed
15 Supply Chain Strategy © 2007 IBM Corporation

16. Global Business Services
Blockbuster products are requiring operational and
business innovation standard
Media Content
Advanced Hardware
Network Connectivity
16 Supply Chain Strategy © 2007 IBM Corporation

17. Global Business Services
Bringing such highly integrated products to market
is becoming more and more challenging
1997 2007+
Sold separately Integrated
CONTENT Felt like tangible Subject to license
property
ADVANCED Long life cycles Short life cycles
COMPONENTS
Wide choice Limited availability
NETWORK
SneakerNet Integrated
CONNECTIVITY
17 Supply Chain Strategy © 2007 IBM Corporation

18. Global Business Services
Content providers may actually turn out to be the
easiest part of this equation
Audio:
Prior to 1998: Stability 1999-2001:Napster 2002+:Legal Downloads
• Centralized • Rise of P2P, lack of • Paid market grows
market, 6 leading viable paid back up
Apple’s
content companies alternatives • Apple dominates market
Market Value: $20B
Video (US):
Prior to 2005: Stability 2004-2007: Broadband Critical Mass 2007+
• Broadcast, cable & • 27 million us homes • Paid market grows Up for
satellite with DSL back up
Grabs
• Rise of UGC • Apple dominates
Market Value: Up to $130B
Content companies are eager not to let this opportunity pass them by
18 Supply Chain Strategy © 2007 IBM Corporation

19. Global Business Services
Advanced chipsets are likely to be a much tougher
delivery for CE companies
Number of IC Design Enterprises in Number of IC Companies with 200mm vs.
China, 1995-2005 300mm Fabs
More and more fabless companies chasing an ever smaller
number of state-of-the-art development facilities.
19 Supply Chain Strategy © 2007 IBM Corporation

20. Global Business Services
A similar consolidation is taking place in network
equipment providers…
Number of NEPs From 20th Century to Today
2000
2000
Dot com 2000 -- Today
2000 Today
Dot com
Collapse
Collapse Convergence &
Convergence &
Late -- 90s Liberalization
Liberalization
Late 90s
Internet
Internet
1991
1991 Boom
Boom
Introduction of
Introduction of
1971 the World Wide
the World Wide
1971
Web
Web
First mobile
First mobile
phone network
phone network
1876
1876
Invention of
Invention of
Telephone
Telephone
Before 1900-
1940s 1950s 1960s 1970s 1980s 1990 1992 1994 1996 1998 2000 2002 2004 2006 2007
1900 1940
Source: IBM IBV analysis
20 Supply Chain Strategy © 2007 IBM Corporation

21. Global Business Services
…who are just mirroring the consolidation of their
customers, the network operators
21 Supply Chain Strategy © 2007 IBM Corporation

22. Global Business Services
Despite these challenges, there has never been a
better time to innovate nor more at stake
Typical Ecosystem Revenues Gross Margins By Component
$385 $620
Network 70%
Ads 90%
$25 $10
$200 Content 30%
Device 10%
Device Content Ads Network
Source: IBM research, client engagements
22 Supply Chain Strategy © 2007 IBM Corporation

23. Global Business Services
3 current realities
Product innovation is important,
1 but it is not enough.
Operations & business model innovation are
2 becoming harder to execute
Extreme collaboration is required to compete
3 and succeed
23 Supply Chain Strategy © 2007 IBM Corporation

24. Global Business Services
We’ve been paying lip service to collaboration for
years, can’t we keep doing that?
Complementary Loosely Unstructured,
to business integrated to back of the
strategy operations envelope
NO!
Core to business Tightly coupled to Rocket science
strategy operations
24 Supply Chain Strategy © 2007 IBM Corporation

25. Global Business Services
Core to strategy: Nowhere more true than in
semiconductor space
Case example: IBM’s
Process and Common Platform
materials research
Product engineering
excellence
High yield chip
design
Consumer
products leader
Complimentary Product
Pure-play foundry
Capabilities manufacturing
Chip
expertise
manufacturing
scale
Common Fab
process synchronized
25 Supply Chain Strategy © 2007 IBM Corporation

26. Global Business Services
Collaboration is tightly integrated today. Welcome your
marketing department to supply chain management
Process Rigor: Deep
integration across teams
internally to line up supply
and demand
Integrated S&OP
Collaboration: Close
working arrangements to
manage across multiple
channels
Product Sales Market
Supply Force Promos One Viewpoint: Timely,
integrated data accessible
in a single environment
Short life cycles and “hit driven” sales activities require collaboration
between inventory management, the sales force, marketing & retail partners
26 Supply Chain Strategy © 2007 IBM Corporation

27. Global Business Services
Rocket Science: Information volumes required for
retail channel management are rising exponentially
National
Locations Information
Aisle Forecasts
End Cap Supply Plans
Regional
Check Out Plan-O-Grams
Display Allocations
S t o r e
Best in class management drives stocking
levels based on promotions, store locations,
and individual store history
27 Supply Chain Strategy © 2007 IBM Corporation

28. Global Business Services
...and globally… China and India, with thousands
of independent dealers pose their own challenges
The problem: layers in the distribution To solve both issues, a major mobile device maker is developing a
system add cost, reduce data accuracy: direct to retailer wireless solution for the China market
OEM OEM
Enterprise CRM System Functionality:
system
Orders
Distribution
National
layers Inventory status
Shipments
Regional Credit
Invoicing
Incentives & news
Local All accessible from a mobile
Wireless smart device, all data available in
phone retail from anywhere in China
Retailer Retailer
A direct connection to the end retailer has never been more important, something
that’s hard to do with 10,000 independent retailers in one country
28 Supply Chain Strategy © 2007 IBM Corporation

29. Global Business Services
It’s difficult, but transformational products weave
together different kinds of innovation
Revenue Enterprise
Industry Model
Model Model
Innovation
Innovation Innovation
Hardware? Usage fee? Integrated?
Software? Subscription? Virtualized?
Service? Device? Joint venture?
29 Supply Chain Strategy © 2007 IBM Corporation

30. Global Business Services
We’ve come a long way: IBM has had more success
since we’ve focused on collaborative efforts
IBM then… IBM now…
Cell processor, collaboratively designed
with Sony and Toshiba on power platform
30 Supply Chain Strategy © 2007 IBM Corporation

31. Global Business Services
Thank You
Paul Brody, Partner
IBM Global Business Services
pbrody@us.ibm.com
Wendy Huang, Managing Consultant
IBM Institute for Business Value
wendy.w.huang@us.ibm.com
© 2007 IBM Corporation