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IBM Smarter ProcessRobert Golladay, Smarter Process Leader, Europegolladay@uk.ibm.com26 Nov, Gothenburg

2Source: Booz and Co., 2011

Managing complexity is a challenge in most industries

Complexity threatens to reduce customer engagementComplexity threatens to reduce customer engagement

Time spent managing complexity (customer variability, performance quality and

workflow efficiency) in service-centric industries has surpassed 50 percent

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Global Automotive Industry Trends

and Challenges

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CEOs are confronted with massive global shifts in the New Economic Environment

Slow down or reversal of globalizationTruck industry is still determining how

aggressively to globalize

Continued globalizationAuto companies have been among the

most global of all industries, truck OEMs

have been determining how to follow

Mature markets retain economic powerGrowth has been stagnant as the market awaits the rate of adoption of connected and

electric/hybrid vehicles

Rapidly developing markets gain economic powerIncredible growth, particularly in China

despite depth of recesssion

Small government, light regulationMove or return to unrestrained market

with limited state ownership or regulatory

reform

Big government, heavier regulationGreater government involvement, more

regulation and government as a

stakeholder in strategic industry

Source: Q8 Which of these future scenarios for the next five years do you consider more realistic? Globalization n=1515; Markets n=1502; Government n=1519, Automotive n=75

15%24% 61%

23%11 67%

15%5% 79%

Not at all/to a limited extent To a large/very large extentTo some extentInsights from the IBM Global CEO Study

5

7%

Complexities Identified by Automotive CEOs in Today’s New Economic Environment

More volatileDeeper/faster cycles, more risk

More uncertainLess predictable

More complexMulti-faceted, interconnected

Structurally differentSustained change

Source:Q7 To what extent is the new economic environment different? Volatile n=1514; Uncertain n=1521; Complex n=1522 ; Structurally different n=1523, Automotive n=75

The New Economic Environment

21% 72%

23%17% 60%

1316% 71%

16%23% 61%

Not at all/to a limited extent To a large/very large extentTo some extent

“Today’s economic environment will be tough for a long time. It is going to force everyone to

look at their businesses differently.”CEO Truck OEM, U.S.

“The market in developed countries is

saturated. We have to go to emerging markets

such as China, Middle-East and Africa”CEO Automotive OEM, Japan.

“We would love to simplify, but the reality is

that we will have to manage complexity going

forward.”CEO Supplier, U.S.

Insights from the IBM Global CEO Study

New forces are disrupting how companies do business

47% growth in cloud

processes

25% productivity

improvement

€100B government

savings

CO

NS

EQ

UE

NC

ES

$3.6B spend by

2014

New forces are disrupting how companies do business

$3.6B spend by

2014

47% growth in cloud

processes

25% productivity

improvement

€100B government

savings

Mobile requires process reinvention

Forrester forecasts that companies will spend about $900 million on mobile process reinvention services in 2013 and up to $2.7 billion in 2014

Cloud deployments force companies to rethink their processes

Gartner ranks Business Process as a Service (BPaaS) as the fastest growing cloud segment with 47% annual growth

Socially-enabled processes drive increased productivity

According to McKinsey, social technologies, when used within and across enterprises, can raise productivity of high-skill knowledge workers by 20 to 25%

Big data drives insight into processes

McKinsey found government administration could save more than €100 billion in operational efficiency improvements alone by using big data

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IBM capabilities for Smarter Process

Enterprise Content

Management

Enterprise Content

ManagementBusiness

Intelligence

Business

IntelligencePredictive

Analytics

Predictive

AnalyticsMaster Data

Management

Master Data

Management

Service Oriented Architecture & IntegrationService Oriented Architecture & Integration

Industry Solutionsand Accelerators

Industry Solutionsand Accelerators

Industry and Functional Consulting Expertise

Industry and Functional Consulting Expertise

Managed Business Processes

Managed Business Processes

GovernmentBanking EnergyHealthcare TelecomInsurance Transport

Case

Management

Case

ManagementBusiness Process

Management

Business Process

ManagementOperational Decision

Management

Operational Decision

Management

Operational IntelligenceOperational Intelligence

Mobile Social Cloud Big Data

Retail

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Automotive Business Imperatives

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The industry must be oriented around changing user priorities…

� Traditionally, automotive enterprises have partnered with related industries and entities to varying degrees.

� Today’s smart automotive enterprise deepens these partnerships to generate new insights and create capabilities—and connects this collaborative ecosystem directly to the consumer.

� This results in the ability to deliver new value and experiences that meet consumers’ evolving needs.

Alternative financing

Fewer manual operationsNew mobility

models

Greenervehicles

Betterservice

Responsible manufacturing Connected

entertainment

Customizable options

Increased safety

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… and change business models and value chains to address evolvingmarket requirements and opportunities.

Evolving FutureRecent Past

Differentiation based on styling and power

Consumer focus on fuel consumption, infotainment, advanced electronics features

Longer warranties and annual maintenance checks

Self monitoring and self-healing vehicles

No direct OEM-consumer relationship

Linkage to the automobile owner via the connected vehicle

High volume production Flexible manufacturing

Captive financing to enable car sales

Captive financing enabling new business models

Supply Chain Speed Cross-industry integration

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....12

Accelerate Change with Optimized Processes and Decisions

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HomeMtgLOB

Commercial Finance LOB

ServicesLOB

International Bank

Branch Site

InternalEmployees

GovernmentOversight

CommercialCustomers

ATM

3rd Party Services

Business

Customers

Customers

E-Banking

3rd

Party Services

Branch Site

PaymentServiceProviders

ATM

Outsourced service providers

Customers

Mortgage providers

Legal Services

Underwriting

Customers

Automotive CEOs Are Charting Their Roadmap to Agility

Across their Dynamic Business Network

Strengthen relationships and integrate with customers, suppliers and partners

Accelerate change with optimized processes and decisions

Control costs and add flexibility with smart applications

Business Process & Decision Management

Connectivity & Mobility

CloudInfrastructure

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BPM

Benefits:� 80% Reduction in Manual

Interactions� Faster Issue Resolution

1. Automatically Prioritizes and Routes Work

2. Guides users through decisions

3. Standardizes resolution across geographies

4. Leverages existing systems and data

5. Monitors for business events and initiates action

6. Real-time visibility and process control

FinanceManagement

Engineer

Warranty Claims

Finance and Ops

Line Worker

Automotive Processes Benefit from a Layer of Control and Visibility with BPM

Dealer

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Adoption is Incremental, Benefits can be Extraordinary

� Tamed incident management scenario in record time

� Implemented twenty processes across their supply chain in 24 months

� Increases customer & distributor satisfaction

� Company-wide adoption by business users

� > 200 simple processes built by business users in production within 18 months

� > 40,000 tasks assigned to users per month within first 6 months

� > 180,000 process instances created in first half of 2012, surpassing total for 2011

� Average 3000 users per day

Europe

� Cut “engineering” time of designers on car systems by 20% in one year

� 60+ BPM Developers across 3 continents

� Multiple processes automated across purchasing, & product development

� Process discovery, process automation and integration, and decision management are all building blocks across the enterprise

� System handles 30,000 rules and 500 transaction types for 4,000 institutions

� 3x faster time-to-market

� 25% cost reduction to maintain business logic

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Business Outcomes Business Outcomes

AchievedAchieved

Here are several recent examples of BPM/BMRS deployments delivering Smarter, more agile processes @ IBM

Mid-Market Deal Registration – Deliver PTI improvement by reducing deal registration cycle time with rules-based work-flow automation.

Supply Chain Alerts – Over $2M annual savings for timely notifications when supply chain disruptions occur.

Cross-brand Pricing Estimator – Reduce pricing proposal implementation from 14 to 1-4 days and deployment to new countries in days versus weeks.

GTS Cloud Sales Enablement – Integrated work-flow, rules and monitoring to reduce partner “register to welcome kit” cycle-time from days to hours.

GMU Geography Location Code Assignment - Enabled GMU reps to update rules (direct) for geography location code assignments, reducing cycle

time from several weeks to just a week for more than 50 countries.

Maintenance Technical Services – Increased IBM Client satisfaction through proactive notification of exposures in clients’ IT inventory by applying rules

derived via analytics

Infrastructure Optimization – Reduced cycle time by 75% to complete the analysis required to migrate from Physical servers to Virtual servers

Business Agility Enablement Cloud - Application teams rapidly acquire shared instances of BPM and Decision Management software in minutes to

implement solutions that achieve business agility.

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4Weeks

KPMG is providing its clients with business benefit in as little as two weeks, helping them remediate bad books of business

Captured critical tax&audit knowledge, applying ad-hoc business patternsand creating a new line of business

Business process management yields significant benefits

3000Average users

per day

3000Average users

per day

Banco Espirito Santo has 200 simple processes in production with80,000 process instances in 6 months

3000 average users per day running on the processes

300%ROI

Horizon Blue Cross Blue Shield generated an average of 300% ROI on each internal process improvement project

Reduced processing time for claims by 20-30 minutes each

$30Million in

savings in six months

Caterpillar generated $30M automating workflow and decision making in the warranty claim process

Visibility, compliance, and adaptability to new international markets

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4 Key Capabilities

Process

Automation

& Integration

Business DiscoveryUnderstanding & Compliance

Business DiscoveryUnderstanding & Compliance

Business Visibility, Monitoring & MeasurementBusiness Visibility, Monitoring & Measurement

Decision Management

Business Events

& Rules

Industry Expertise and Solutions

Typical Entry Points demanded by clients to achieve Process Innovation

Analytics Enterprise Content

Management

Master Data

ManagementIntegration

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Install base of over 5,000+ active implemented customers and 800+ business partners

Install base of over 5,000+ active implemented customers and 800+ business partners

Leader in Gartner’s Magic Quadrant for Intelligent Business Process Management Suites and leader in the Forrester Wavesfor BPM Suites and Dynamic Case Management

Leader in Gartner’s Magic Quadrant for Intelligent Business Process Management Suites and leader in the Forrester Wavesfor BPM Suites and Dynamic Case Management

#1 market share in Business Process Management (BPM) and Business Rule Management Systems (BRMS) according to Gartner and IDC

#1 market share in Business Process Management (BPM) and Business Rule Management Systems (BRMS) according to Gartner and IDC

Global Business Services and ISSW established the Smarter Process Center of Competency (CoC) to provide deep expertise and create repeatable Smarter Process assets

Global Business Services and ISSW established the Smarter Process Center of Competency (CoC) to provide deep expertise and create repeatable Smarter Process assets

Why IBM for Smarter Process?

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Merci

Grazie

Gracias

ObrigadoDanke

Japanese

French

Russian

German

Italian

Spanish

Brazilian Portuguese

Arabic

Traditional Chinese

Simplified Chinese

Thai

Korean

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130 milliseconds

per transaction

MasterCard processes each payment transaction within 130 milliseconds per request

43,000 transactions per minute; Responds to fraud threats within hours

Operational decision management yields significant benefits

96%straight-through

processing

96%straight-through

processing

Swiss Customs achieves 96.5% straight-through processing to validate electronic customs declarations

200,000 declarations daily; Over 700 business rules

8000transactions per second

Visa Europe handles up to 8000 credit card payment authorizations per second across Europe

60 rule changes in 13 months; Over 30,000 business rules

300%improvement

WorkSafe Victoria sees 300% improvement in payment times to workers compensation treatment providers

85% straight-through processing; Over 2,000 complex rules

IBM & customer confidential

Costs, risks and implied value of Warranty Management in the Automotive Industry

Claims paid(US Automotive Industry)

Reserves held(US Automotive Industry)

Warranty Costs are an important cost factorfor the automotive industry. US statistics show (2011)efforts of > 9 bil. USD on the OEM and 1,6 bil. USDon the supplier side. For these costs companies needto hold high reserves.

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Assess Eligibility

www

Call Center

Reseller

Eligible?

AssessPaymen

t

Eligible?

Notify

Settle

Manual AssessmentY

N N

Y

� Decision logic embedded in procedural progamming logic; database/stored procedures; domain experts

� Limited straight-through processing

� Lack of consistency, granularity and specialization

� Claims leakage/fraud

Less Automated, Less Precise/Flexible

78%

Warranty Claims Processing - Before

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Situation• High touch claims process

– 1.7M claims per year, $1B payouts

– 22% of all claims (in $) are automatically evaluated & settled

• Only 8% for claims above $2500, yet representing 40% of total payouts

• Inconsistencies– Claims processed & settled by people executing corporate policies and

exercising their judgment

– Lack of auditability

• Inability to change & adapt– No clear view of policies in effect at any specific period of time.

– Difficult to understand and change business policies, thus limiting the business tactics and strategy

– Lacking ability to quickly adjust and adapt to the changing business environment

– No trend analysis or easy tie-back to product management, engineering, production

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Approach

Incremental refinement of existing guidelines

• Create new guidelines to automatically settle 100% of claims lower than $800. (38% of the total warranty claims transaction)

• Refine existing guidelines for the current automatic processed claims:more consistency & minimized claims payouts to the extent possible(38% of the total warranty claims transaction)

Expansion of automated settlement with new guidelines

• New guidelines (greater complexity) for higher value claims, which account for 65% of the total claims dollars paid out(24% of the total current warranty claims transaction)

• Decision logic to engage an expert when a creative human decision is required

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Assess Eligibility

www

Call Center

Reseller

Eligible?

AssessPaymen

t

Eligible?

Notify

Settle

Manual AssessmentY

N N

Y

Assess Eligibility

www

Call Center

Reseller

Eligible?

AssessPaymen

t

Eligible?

Notify

Settle

Manual AssessmentY

N N

Y

� Decision logic embedded in the process model or code

� Limited straight-through processing

� Lack of personalization and specialization

� Decision logic externalized

� Highly automated

� Context-specific consistent and granular throughout

Less Automated, Less Precise/Flexible

More Automated, More Precise/Flexible

78%

0-18%

Warranty Claims Processing - After

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Streamlining Compliance Processes

If the warranty claim is for 400 horsepower turbo diesel

and the mileage is less than 150k milesand failure codes d and e apply

Then approve warranty claim

If mileage is less than 150k miles and failure code a,

b, and c apply Then manually review warranty claim

Examples:

Copyright © 2008 by ILOG, Inc. - All Rights Reserved

These Decisioning Elements

Or Decision Intensive Applications

are Business Rules rich

30 30

Streamlining Compliance Processes

If the warranty claim is for 400 horsepower turbo diesel

and the mileage is less than 150k milesand failure codes d and e apply

Then approve warranty claim

If mileage is less than 150k miles and failure code a,

b, and c apply Then manually review warranty claim

Examples:

Copyright © 2008 by ILOG, Inc. - All Rights Reserved

These Decisioning Elements

Or Decision Intensive Applications

are Business Rules rich

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Adoption can be done incrementally

Project …….. to Program ….... to Transformation

Think Big. Start small. Grow Fast.Think Big. Start small. Grow Fast.

Build Project-Based Credibility1

Establish a Program2

Transform Across and Beyond the Enterprise3

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Install base of over 5,000+ active implemented customers and 800+ business partners

Install base of over 5,000+ active implemented customers and 800+ business partners

Leader in Gartner’s Magic Quadrant for Intelligent Business Process Management Suites and leader in the Forrester Wavesfor BPM Suites and Dynamic Case Management

Leader in Gartner’s Magic Quadrant for Intelligent Business Process Management Suites and leader in the Forrester Wavesfor BPM Suites and Dynamic Case Management

#1 market share in Business Process Management (BPM) and Business Rule Management Systems (BRMS) according to Gartner and IDC

#1 market share in Business Process Management (BPM) and Business Rule Management Systems (BRMS) according to Gartner and IDC

Global Business Services and ISSW established the Smarter Process Center of Competency (CoC) to provide deep expertise and create repeatable Smarter Process assets

Global Business Services and ISSW established the Smarter Process Center of Competency (CoC) to provide deep expertise and create repeatable Smarter Process assets

Why IBM for Smarter Process?

33

Merci

Grazie

Gracias

ObrigadoDanke

Japanese

French

Russian

German

Italian

Spanish

Brazilian Portuguese

Arabic

Traditional Chinese

Simplified Chinese

Thai

Korean