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Strategic Investments GroupTransformational ChangeJoe Deklic

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What is Transformational Change ?

The process of transformational growth during the 1990s shaped the boom and bust of the New Economy, the new technologies drove productivity growth which created extraordinary business value.

There is a relationship between the development of information and communications technologies, structural change and expansive economic growth when combined with finance and macro policy, and, in particular, the government budget.

Strong Public Sector Strategy combined with structural change and new business models will take us beyond traditional GDP growth into market share expansion and adjacent markets.

Bigger , Bolder Faster …..

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Transformational Change …

• Kodak invents digital photography in 1975 but doesn’t successfully capitalize on its invention.

• Xerox famously devises the mouse, the laser printer, and the graphical user interface ( GUI ) but fails to commercialize any of them.

• Digital Equipment Corp. spent $2 billion developing a personal computer …. too little, too late.

• What makes opportunities like these so difficult to grasp is that, so often, they require companies to move far beyond their core into uncharted territory—into their white space

» Seizing the White Space, Mark Johnson

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Evolution of Transformational Change

From 1771 —The Industrial RevolutionFrom 1829 — Age of steam and railways From 1875 — Age of steel, electricity, and heavy engineeringFrom 1908 — Age of oil, the automobile, and mass productionFrom 1971 — Age of information and telecommunicationsFrom 2003 — Age of cleantech and biotech

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Are we ready for the next ?

There are vast changes yet to come that will change every aspect of business. Developing the capacity to become Future Smart, to learn to anticipate future trends and change may well become the key skill to survival

Technology will be the major enabling force for business in the future transforming supply chains, value nets, business models, workstyles and opening up new global markets for expansion

The wireless revolution is just beginning. The next generation of consumers, the kids of today, will have less barriers to frustrate their adoption of technology. As communications and commerce merge, as technology becomes pervasive and invisible, tomorrow's consumers will forge new lifestyles.

Dr. James Canton; Institute for Global Futures

Age of Global Intelligent

Marketplace

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Southwest Airlines

• The Challenge: • Make regional air travel competitive with bus service.

• The Solution:• To deliver revolutionary low prices, Southwest needed

to keep margins low. To make money at these margins, it needed to need to keep direct costs and overhead low and resource velocity high, getting more turns from its capital equipment. To lower costs Southwest chose to fly into secondary airports with lower gate fees, negotiated revolutionary profit-sharing contracts with its pilots’ union, entered into long-term contracts to lower fuel costs, and eliminated expensive extras like in-flight food and entertainment. To both lower costs and increase resource velocity, it chose to use a single type of plane, which both lowered repair and maintenance costs and decreased turnaround times. And it adopted an automated, direct sales model for tickets, which eliminated travel agent fees and put payments in the company’s hands more quickly.

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Whole Foods Market

• The Challenge: • Create a national market for local organic

produce and other perishables

• The Solution: • Whole Foods inverted the established

supermarket model: Rather than keep costs low through centralized distribution networks and profiting from selling high volumes of low-margin goods, Whole Foods relies on higher prices and margins on the perishables, which its customers buy in large quantities. To sell customers on the higher prices, it carefully coordinates its centralized packaged-goods inventory with its local supply chains of organic foods and homeopathic products and invests heavily in making the grocery-shopping experience more pleasurable and less tiresome.

Business Strategy& Goals

Transformational Approach

Today’s fragmented approach on big deals does not scale. Even before the deals we need to adopt a uniform strategy around key country priorities a uniform pricing strategy, a partner strategy and an execution strategy

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Business Model Innovation

The process by which a company delivers radically new value to existing or new customers by devising dramatically new business models that deliver profits in innovative new ways

The Canadian economy is predicted to increase by 2.6 percent in 2010 and 3.6 percent in 2011

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Apple – Adjacency Innovation

• The Challenge: • Find an antidote to relentlessly declining market share

and break out of the role of a perpetual niche player in the personal computer market.

• The Solution: • Apple began by going down its well-trodden path of

design-driven product innovation with the iMac and Apple’s first laptop, the iBook. That was enough to stop the bleeding but not ignite growth.

• With the iPod, Apple ventured into music retailing, an entirely new market for the company. By combining new technology with a new business model – offering a convenient way to upload digital music through the iTunes Web site – Apple revolutionized the way people consume portable entertainment and created an entirely new, highly lucrative, market.

Business Impact vs. Ease of Implementation

High Impact

Low Impact

Easy to Implement Difficult to Implement

Proactive SFDC Polling

Top Deal review

BusinessProcess Change

Coord & Integrated Strategy

Timeline

Filter Market Adjacencies

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• More than half of the twenty-six companies founded since 1984 that have entered the Fortune 500 between 1997 and 2007 did so through business model innovation.

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Key Elements of a business model

Risk Sharing Business Models

• Cisco “Skin in the Game” - “Share my pain”• Help lower OpEx• Help manage and optimize CapEx• Help match Expense to Revenue• Provide Solutions & address local SP requirements• Bandwidth and capacity management (video, OTT etc.)• Low Cost Service but still want SLAs• Risk Sharing / Mitigation, Profit Sharing, Revenue Sharing• Different commercial arrangements (not just discount %)• Next Generation Business Partner Models

Management of Complexity

Partnership Value Chain…

Business Partnerships

Risk & Reward

Operations Management Partnership

Network Transformation partnership

Solutions Vendor

Equipment Vendor

Network / Solution Integrator

Source: Cisco IBSG, 2008

Perform

ance SLA’s

Business SLA’s