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Digital Transformation – The Road to Operational Efficiency Eddie Hartman Simon-Kucher and Partners Bob Irvine Operations Global Software Licensing Viavi

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Digital Transformation – The Road to

Operational Efficiency

Eddie Hartman

Simon-Kucher and Partners

Bob Irvine

Operations

Global Software Licensing

Viavi

Introducing Simon Kucher: Global presence

34 offices worldwide, > 1000 employees, €240m reven ue in 2016

Austria, ViennaBelgium, BrusselsDenmark, CopenhagenFrance, ParisGermany, BonnGermany, CologneGermany, FrankfurtGermany, HamburgGermany, Munich Italy, MilanLuxembourg, LuxembourgPoland, WarsawSpain, BarcelonaSpain, MadridSweden, StockholmSwitzerland, GenevaSwitzerland, ZurichThe Netherlands, AmsterdamTurkey, IstanbulUnited Kingdom, London

Australia, SydneyChina, BeijingChina, Hong KongJapan, TokyoSingapore, SingaporeUAE, Dubai

Brazil, São PauloCanada, TorontoChile, Santiago USA, AtlantaUSA, BostonUSA, Mountain ViewUSA, New YorkUSA, San Francisco

Asia-Pacific/the Middle East

EuropeAmericas

Source: Simon-Kucher & Partners

Licensing Live 2017 - GPSS and Framework 2

Simon-Kucher: Recognized Leader in Revenue Growth C onsulting

Source: Simon-Kucher & Partners

Source: brand eins Thema special edition: Consulting –industry report from brand eins Wissen and Statista, online survey, May 2014, 2015, 2016, 2017

brand eins Thema

Marketing, sales, pricing

Simon-Kucher & Partners

BCG

McKinsey & Company

1

2

3Source: Capital, survey of the best consultancies in France, October 2016

Capital

Marketing, sales, pricing

Simon-Kucher & Partners

on a par with

BCG

McKinsey & Company

1

The Economist

Pricing

Source: The Economist: Business Consulting: A Guide to How it Works and How to Make it Work

...

Forbes

Marketing, brand, pricing

Source: Forbes, Survey of best management consulting firms in the US, October 2016

Simon-Kucher & Partners

on a par with

Boston Consulting Group

McKinsey & Company

Simon-Kucher & Partners1

“The world’s leading pricing consultancy”

Licensing Live 2017 - GPSS and Framework 3

Source: Digitalization initiative core team assessment

The world is shifting towards digital, and successf ul companies must adapt.

Internet of Things Mobile payment

Internet 4.0

Earned content

Crowd funding Ratings and likes

Crowd servicesRobots/artificial intelligence

Smart partnering/ platforms

Omni-channel

Always on Customer

Virtual reality, augmented reality

Smart home

Social media

Active sourcing

Curated shopping

Big Data

Cloud technologies

BIM

XaaS

Conversational commerce

Predictive maintenance

Companies need to define:

� How they position themselves in the market

� What they do, and what they don't do

� How they enable their clients to be successful in the digitalized world

M2M

HW � SW

Blockchain

Hyper-personalization

Licensing Live 2017 - GPSS and Framework 4

* does not include "other"Source: Global Pricing & Sales Survey 2017 (n = 1,925)

2017 Global Pricing & Sales Study covered nearly 2, 000 respondents

…From all major industries

Industries % of total*

Building Materials/Construction 13%

Consumer 9%

Wholesale & Distribution 7%

Chemical 6%

Machinery 6%

Healthcare 6%

Automotive 4%

TIME 4%

Retail 4%

Software 4%

Industrial Services 4%

Transport & Logistics 4%

Banking & Financial Services 3%

Oil & Gas 3%

Insurance 2%

Electronics 2%

Travel & Hospitality 2%

Medical Technologies 2%

Raw Materials 2%

Paper & Packaging 1%

Energy & Utilities 1%

Over 40 countries

USA 641

Germany 290

Poland 148

France 119

Netherlands 93

UK 80

Switzerland 72

Turkey 55

Ireland 52

Spain 50

Austria 45Denmark 24

Japan 23Australia 20

Sweden 18Mexico 18

Belgium 16Other 161

B2B60%B2C

17%

EquallyB2B & B2C…

13%

13%

12%

12%

15%

11%

24%

< 10

10 to < 50

50 to < 100

100 to < 200

200 to < 500

500 to 1,000

>= 1,000

…And most firm types

Licensing Live 2017 - GPSS and Framework 5

A competitor77%

We did - intentionally

11%

We did - accidently

12%

Source: Global Pricing & Sales Survey 2017 (n = 1,925); Q21 Is your company currently involved in a price war?

Two-thirds of all industries are currently engaged in price wars, and most companies blame their competitors

Is your company currently involved in a price war?

Who started the price war that your company is involved in?

Most price wars are unknowingly started by companies with poor pricing practices.

Involved in a price war

47%

Price warin industry,

but not involvedin it, 20%

No price war in our industry

33%

Price wars lead to higher pricing pressure in the m ajority of industries.

Licensing Live 2017 - GPSS and Framework 6

Source: Global Pricing & Sales Survey 2017 (n = 1,925); Q19 Have you experienced higher price pressure in the last two years (i.e., the need to lower your prices or to give more discounts, rebates, promotional offers, etc.) than previously?; Q20 In your opinion, why has price pressure intensified? (select 1-3); Note that %s will not add to 100% given that respondents were able to select multiple answer choices

The increased pricing pressure in the last two year s is mainly driven by factors linked to digitalization

16%

23%

32%

33%

47%

Top 5 reasons for intensified price pressure:

Experienced higher price pressure in the last two years?

Yes, 75%

No, 25% Top 3 drivers

can all be linked to digitalization!

Low-price competition

Increased customer negotiation power

Increased price transparency

Increased professional procurement processes

Need to meet targets

Digitalization further increases pricing pressure.

Licensing Live 2017 - GPSS and Framework 7

Source: Global Pricing & Sales Survey 2017 (n = 1,925); Q12 Have you invested in digitalization initiatives in the past three years?Note: "Digitalization" is not synonymous with "digitization", as the latter merely refers to the conversion of data/information from analog to digital or binary.

81% of all companies surveyed have made investments in digitalization in the past three years

No19%

Yes

Have you invested in digitalization initiatives in the past three years?

� Digitalization: Use of digital technologies to change a business model or improve process efficiency of customer interactions.

� Goal: Increase the value-to-customer and ultimately produce incremental revenue or new revenue streams.

� Often includes a shift from a product-centric to a customer-centric model which focuses on selling a solution, and this requires changing the monetization model.

Licensing Live 2017 - GPSS and Framework 8

9Licensing Live 2017 - GPSS and Framework

Source: Global Pricing & Sales Survey 2017 (n = 1,925), Q13 What is the main objective of your digitalization initiatives?; Q15 Have your digitalization initiatives had a visible impact on your topline?

Increasetopline andreduce cost

54%Increase topline

21%

Reduce cost21%

Other4%

What is the focus of your digitalization initiatives?

Yes23%

No77%

75%

Have your initiatives had a visible impact on your top line?

23%

Most companies fail to achieve topline growth with digitalization

75% of digitalization efforts focused on increasing the top line, but only 23% of all companies achieved the targeted impact

Licensing Live 2017 - GPSS and Framework 10

Source: Global Pricing & Sales Survey 2017 (n = 1,925); Q2 In the next three years, are unit cost reductions realistic at your company?; Q1 Which of the following is the biggest driver of future profit growth in your business?

Unit cost reductions realistic in the next 3 years?

Biggest driver of future profit growth?

57%

43%

No,unit costs will remain the same

or increase

Yes,significant unit cost reductions

are feasible

85%

15%

Growingrevenue

Reducing variableor fixed costs

Digitalization success is critical: As significant c ost reductions become less feasible,topline growth will be the main driver for future p rofits.

The ability to drive topline growth through digitiz ation will become critical in the near future

Licensing Live 2017 - GPSS and Framework 11

Conclusion: Digital Technologies Will Enable Busine ss Evolution

GRAPHICTBD

TODAY

Organizations first build products, then try to find people willing to buy them. Services come after the sale.

Customers look at existing products and determine to what extent they solve a problem

PAST

GRAPHICTBD

Organizations engage with customers to build a deep understand of their needs and subsequently build product and service solutions to exactly fit the customers and maximize customer life time value

Digital channels enable customers to get the products and services they need on demand

Licensing Live 2017 - GPSS and Framework 12

Source: Simon-Kucher & Partners

A Framework for Digital Transformation

Business Model Reinvention

Market Disruption Strategy

Align on Metrics for Digital Success

Digital Quality Management

Build / Refit Infrastructure for Digital

Digital Strengths Assessment and Organizational Readiness

Change Management Plan

Adopt Rapid, Cross-Functional Dev Methodology (Agile)

Enable Cross-Departmental Data Capabilities

Implement Digital Governance and Compliance

Digital Prospecting of Customer Needs / Monetizatio n Models

Adoption of Customer-First Solution Design Methodology

Assessment of Emergent Tech (XaaS, IoT, hyperlocal, omnipresent)

Optimize Online Sales Dialogue

Create Omnichannel Digital Demand Plan

Digital CLV / Cross-Sell / Lifecycle Optimization

CRM and Digitally Enabled Sales Excellence

Enable Supporting FunctionsBuilt IT Infrastructure

Align Executive Leadership

Deliver highest value digital products & services Customize Go-To-Market Strategy

Define Digital Vision and Strategy

Build DigitalFoundation

Develop customer-centric digital approach

Licensing Live 2017 - GPSS and Framework 13

Software Licensing Standardizationin Operations

Bob IrvineGlobal Software Licensing Engineer

© 2017 Viavi Solutions, Inc. 15

Our NSE products and solutions help service providers and IT organizations optimize and maintain many of the world’s largest and most complex networks.

• Test and Measurement

• Service Activation & Assurance

• Performance Management

Our OSP segment are renowned experts in the management of light, leveraging core optical coatings capabilities to design and manufacture a range of specialty products.

• Thin-Film Coatings

• Special-Effects Pigments

• Miniature Spectroscopy

• Anti-Counterfeiting Solutions

Viavi Solutions

Over 1,600,000 instruments in use around the world

45global offices

$811Mrevenue FY17

3000+employees

© 2017 Viavi Solutions, Inc. 16

Licensing: What problem set is OPS trying to solve?

• multiple systems – unique subject matter experts• process knowledge lost through attrition / reorganization• growing diversity in the types of licensing to meet market needs

Support & Scalability for Licensing

• Enterprise (Gemalto) – Operations / IT owned / managed• 40+ home-grown tools – R&D group owned / managed• sparse documentation

Disparate License Tool Ownership & Expertise

• distributed systems are hard to manage for control and maintenance• centralized IT managed systems are more robust and efficient

Inconsistent Maintenance of Licensing Servers

• multiple systems mean multiplied annual costs• soft costs -> ‘fire drills’ to support legacy / home-grown systems

Operational Costs

© 2017 Viavi Solutions, Inc. 17

Licensing Type III Licensing Type III

Develop LicensingDevelop Licensing

Licensing Type II Licensing Type II

License Flow – Current State

PRODUCT CONCEPTDefine Features

Product ComponentsMonetization Strategy

PRODUCT CONCEPTDefine Features

Product ComponentsMonetization Strategy

NEW PRODUCT INTROIdentify Parts

License MatrixPrepare Licensing

NEW PRODUCT INTROIdentify Parts

License MatrixPrepare Licensing LICENSING

{Entitlements}{Licenses}

{Software Binaries}

LICENSING{Entitlements}

{Licenses}{Software Binaries}

DEVELOPMENTDevelop SoftwareLicense Features

DEVELOPMENTDevelop SoftwareLicense Features

PRODUCT RELEASECatalog ItemsSoftware BOM Load Licensing

PRODUCT RELEASECatalog ItemsSoftware BOM Load Licensing

CUSTOMERReceive EntitlementsSoftware DownloadLicense Activation

CUSTOMERReceive EntitlementsSoftware DownloadLicense Activation

FULFILMENTProcess Order

Create Entitlements

FULFILMENTProcess Order

Create Entitlements

ORDER MANAGEMENTORDER MANAGEMENT

CRM SYSTEMCRM SYSTEM

SALESOrder for Products

SALESOrder for Products

KEY: OPS R&D PLM SALES CUSTOMER

© 2017 Viavi Solutions, Inc. 18

© 2017 Viavi Solutions, Inc. 19

License Flow – Future Vision

PRODUCT CONCEPTDefine Features

Product ComponentsMonetization Strategy

PRODUCT CONCEPTDefine Features

Product ComponentsMonetization Strategy

NEW PRODUCT INTROIdentify Parts

License MatrixPrepare Licensing

NEW PRODUCT INTROIdentify Parts

License MatrixPrepare Licensing

GEMALTO{Entitlements}

{Licenses}{Software Binaries}

GEMALTO{Entitlements}

{Licenses}{Software Binaries}

DEVELOPMENTDevelop SoftwareLicense FeaturesRe-use Licensing

DEVELOPMENTDevelop SoftwareLicense FeaturesRe-use Licensing

PRODUCT RELEASE Catalog ItemsSoftware BOM Load Gemalto

PRODUCT RELEASE Catalog ItemsSoftware BOM Load Gemalto

CUSTOMERReceive EntitlementsSoftware DownloadLicense Activation

Order Products Online

CUSTOMERReceive EntitlementsSoftware DownloadLicense Activation

Order Products Online

AUTOMATED FULFILMENT

{E-Commerce}{Create Entitlements}

AUTOMATED FULFILMENT

{E-Commerce}{Create Entitlements}

ORDER MANAGEMENTORDER MANAGEMENT

CRM SYSTEMCRM SYSTEM

SW INSTALL -BASESW INSTALL -BASE

SALESOrder for Products

SALESOrder for Products

KEY: OPS R&D PLM SALES CUSTOMER

© 2017 Viavi Solutions, Inc. 20

Licensing: Future State & Benefits

Standardized tool for License Development • re-use license types across products / business units• enhance flexibility in software monetization• reduce OPS, R&D & PLM effort during New Product Introduction cycles

License Delivery linked to Order Management Systems • automate to reduce / eliminate OPS software delivery touch points• enable e-commerce• enable Install Base tracking for software• reduce revenue leakage

Improvements to Business Processes• automate control of royalty bearing items• automate validation of entitlement to Service Support• automate validation of entitlement to software / firmware updates• enhanced Rev-Rec capability with auditable software delivery confirmation

© 2017 Viavi Solutions, Inc. 21

Standardising Licensing will enable:

• common standardized processes for licensing• increased automation to reduce touch points

Scalability of Operations for Software

• common license mechanisms• re-use of licensing code modules

New Product Development Efficiency

• simplified licensing process• breadth of licensing types to meet market needs• accommodate e-commerce• reduction in revenue leaks due to licensing gaps

Increase Revenue Opportunities

Key questions to evaluate

Evaluation for Digital Transformation

Topic We will answer these questions

Assess Competitive & Market Environment

Digital Maturity Where are you on the digital maturity curve relative to the standard in your industry?

Scale of Transformation Will digital playing a support / enabling role, or will it transform the fundamentals of your business?

Competitive Landscape How rapidly are your competitors embracing digital? How will they respond to your transformation?

Analyze Customer Needs

Digital SegmentsCan digital help you identify benefits that some segments perceive as exceptionally valuable, and for which they have a higher willingness-to-pay than other segments?

Digital Uptake Can digital play a part in expanding new-customer acquisition? Does your offering have viral potential?

Data-DrivenInsights Will expanded data improve (a) retention, (b) cross-sell, (c) upsell, (d) identification of new needs?

Assess Org Capabilities

ResourcePlanning

What is your level of organizational readiness? Are there sufficient available resources to successfullydevelop and implement a digital solution?

Digital Goals Alignment

GoalPrioritization

Is your organization internally aligned around the same set of digital goals? Are all members of your organization invested in the success of the digital solution, and prioritized it sufficiently?

Digital Roadmap

Allocating for Digital How will digital transform your roadmap? What planned initiatives will reinforce your digital evolution?

Developing KPIs What metrics do you need to define and monitor the success of your digital program?

1

2

3

5

4

Licensing Live 2017 - GPSS and Framework 22