IBM Global Business Services
IBM Global CEO Study:
The Enterprise of the Future
Consumer Products & Retail Industry Perspective
October, 2008
© Copyright IBM Corporation 2008
The Enterprise of the Future is…
2
1
2
3
Hungry
for
change
Innovative Globally
beyond
integrated
customer
imagination
Global CEO Study 2008 | CP & Retail Perspective | October 2008
4
5
Disruptive
by nature
Genuine,
not just
generous
© Copyright IBM Corporation 2008
Consumer Products CEOs are generally more cautious about change, but
view growth markets, informed customers and CSR positively
Lower CP vs. GLOBAL Higher
Consumer Products (CP) CEO CORE TRAITS
1. Hungry for change: recognize the need for substantial change and
are confident in their ability to manage the required degree of change.
Outperformers see need for greater change, and are more confident.
2. Innovative beyond customer imagination: view the rise of
purchasing power in growth markets as positive. More informed and
collaborative customers is also positive, but investment will be limited.
3. Globally integrated: looking to benefit from global integration CP
CEOs are deeply changing their capabilities, knowledge and assets,
and partnering when entering new markets.
4. Disruptive by nature: plan a more conservative approach to
business model innovation – emphasizing differentiating activities,
redefining existing markets and a new mix of products/services.
5. Genuine, not just generous: capitalize on increased customer CSR
expectations through a combination of environmental initiatives, new
products and greater transparency.
3
Global CEO Study 2008 | CP & Retail Perspective | October 2008
© Copyright IBM Corporation 2008
IBM Global Business Services
The Enterprise of the Future is…
Hungry for Change
© Copyright IBM Corporation 2008
The Enterprise of the Future is… Hungry for Change
CP CEOs see a need for substantial change and most are optimistic
about successfully managing the required degree of change
Global
Consumer Products
22
16
%
CHANGE
GAP*
20
%
6%
11%
Retail
%
10%
11%
19%
19%
14%
14%
22%
20%
83%
24%
82%
61%
Change Needed
Past Success
76%
66%
56%
Change Needed
Past Success
Change Needed
Past Success
Change Needed
* Change Gap: difference or ‘gap’ between expected level of
change needed and past success in managing change
Source: IBM Global CEO Study 2008; n (2006) = 709, n (2008) = 1104, n (CP) = 73
5
Global CEO Study 2008 | CP & Retail Perspective | October 2008
CP CEOs…
 … see substantial
change needed
 … are more successful
than their global peers in
managing change
 Perception is that CP
companies are managing
a lesser degree of
change than other
industries
No/limited Change
Moderate Change
Substantial Change
Past Success
No/limited Success
Moderate Success
Successful
© Copyright IBM Corporation 2008
The Enterprise of the Future is… Hungry for Change
CP industry outperformers universally perceive a need for substantial
change, and bring a strong track record in managing their organizations
through such change
Underperformers**
CHANGE
GAP*
-8
 CP industry findings around underand over- performers much stronger
than ‘Global’ results
12
%
7%
Outperformers**
%
14%
13%
100%
27%
14%
88%
 CEOs of outperforming CP companies
universally see substantial change
needed
 These CEOs are also much more
successful than their underperforming
peers in managing change
72%
64%
Change Needed
Change Needed
Past Change
Success
Change Needed
Past Change Success
No/limited Change
No/limited Success
Moderate Change
Moderate Success
Substantial Change
Successful
Past Change
Success
•Difference or ‘gap’ between expected level of change needed and past success in managing change
** Performance based on industry comparisons within survey sample of revenue CAGR 2003 to 2006
Source: IBM Global CEO Study 2008; n (underperformers) = 14, n (outperformers) = 8
6
Global CEO Study 2008 | CP & Retail Perspective | October 2008
© Copyright IBM Corporation 2008
The Enterprise of the Future is… Hungry for Change
CP CEOs face a complex landscape of external change drivers, with
market factors as their primary concern
External Forces Impacting
the CP Organization
Market Factors
61%
People Skills
41%
Globalization
41%
Regulatory Concerns
35%
Environmental Issues
28%
Technological Factors
26%
61%
 Rapidly rising food and energy prices
reinforce the importance of Market
Factors as a change driver
 The combination of Regulatory Concerns
and Environmental Issues highlights the
criticality of a comprehensive CSR
strategy
 The top three external factors for Retail
were:
1. Market Factors
Macro-Economic Factors
22%
2. People Skills
Socio-Economic Factors
Other
22%
9%
Geopolitical Factors
5%
Budgets
4%
Source: IBM Global CEO Study 2008; n (Global) = 1130; n (CP) = 74
7
3. Socio-Economic Factors
“In retail, the critical success factor is people. Our challenge
is to connect 14,000,000 customers to what we sell, and that
is done by our 14,000 associates”
Marcelo Jose Ferreira e Silva,CEO, Lojas Pernambucanas
Global CEO Study 2008 | CP & Retail Perspective | October 2008
© Copyright IBM Corporation 2008
The Enterprise of the Future is… Hungry for Change
In the ‘People Skills’ area CP companies face issues attracting,
building and leveraging talent
Building and leveraging talent is an
issue facing most companies...
 IBM’s 2008 Global Human Capital Study revealed:
• Three out of every 4 respondents see ‘building
leadership talent’ as their #1 challenge, and
• 1/3 of all respondents view ‘Rotating leaders across
BU/geographies’ as a key challenge
• Among CP respondents the role of HR in Business
Transformation efforts lagged vs. other industries
CP
Total
… for the CP industry the issue
starts early on, with recruiting
 Fortune magazine’s annual survey
of MBA’s highlighted the continuing
decline in the attractiveness of CP
as an industry
Survey
Year
Consumer
Goods #
2005
20% ▼
2006
18% ▼
2007
16% ▼
2008
12% ▼
# Percent of MBA candidates who
say they'd ideally like to work in
Consumer Goods
Increasing Role
Source: Fortune “100 Most Desirable MBA Employers” 2006, 2007, 2008 and IBM Institute for Business Value (IBV) analysis, IBM IBV 2008 Global Human Capital Study
8
Global CEO Study 2008 | CP & Retail Perspective | October 2008
© Copyright IBM Corporation 2008
The Enterprise of the Future is… Hungry for Change
P&G, uses numerous partnerships to redefine their business model
and leverage ideas globally, boosting profits by ~70%
Online techniques reduced
new product concept testing
from weeks to days
Partnered with Clorox on
food-wrap technology to
get it to market faster
Licensing packaging
technologies and
ingredients to ConAgra
Rolled out global
e-procurement
system for MRO
Product
Development
“Connect & Develop Program”
generates new product ideas
outside of the company
Outsourced bar
soap and Vick’s
brand mfg.
Procurement
Manufacture
Partners include
Schneider and
Exel Logistics
Logistics &
Distribution
Divest low margin,
slow growth products
= Differentiators
Consumer
Marketing
Outsourced CRM
technologies, contact support
and global fulfillment services
Industry leader in
trade customer
collaboration and
integration
Customer
Management
Deploying PRISM with AC Nielsen to
measure and drive in-store marketing
= Non-differentiators
“We created our ‘connect and develop’ innovation model….we collaborate with organizations and
individuals around the world, systematically searching for proven technologies, packages, and products
that we can improve, scale up, and market, either on our own or in partnership with other companies….”
“From 2000 to 2004, P&G profits jumped by almost 70% and revenues increased by 30%”
“We have more than doubled our innovation success rate and more than doubled the future value
potential of the innovations in our pipeline.”
Source: Sykes Enterprises Press Release, 30 Jun 03; Business Week, 7 Jul 03; Oster Dow Jones Select, 17 Jun 03; PR Newswire, 17 Jun 03; Fast Company, Sept 03;
http://www.ecom-ohio.org, July 2002; Company web sites. Quotes from Harvard Business Review, McKinsey Quarterly, 2004 Annual Report
9
Global CEO Study 2008 | CP & Retail Perspective | October 2008
© Copyright IBM Corporation 2008
The Enterprise of the Future is… Hungry for Change
Unilever is also undertaking major changes to their businesses, go
to market approaches and operations
Unilever today announced that it has signed a definitive agreement for the disposal of its
Bertolli olive oil and vinegar business with Grupo SOS for a consideration of €630m
July 21st, 2008: The transaction is structured as a worldwide, perpetual licence by Unilever of the Bertolli brand in
respect of olive oil and premium vinegar.
Unilever will retain the Bertolli brand for all other categories including margarine, pasta sauces, and frozen meals. The
Bertolli brand remains a priority for Unilever with strong growth plans based on capturing the growing appetite for
Mediterranean food products.
Before
After
$
Suppliers
Suppliers
Oil, Vinegar
$
$
$
Retailers
$
Retailers
Unilever
$
Unilever
All Categories
10
$
$
$
Global CEO Study 2008 | CP & Retail Perspective | October 2008
Spreads,
Sauces, Frozen
$
© Copyright IBM Corporation 2008
The Enterprise of the Future is… Hungry for Change
IKEA: The world’s largest furniture manufacturer and retailer has
grown internationally by changing fundamentals in home furnishing
 Revolutionized the home furnishing industry by significantly reducing shipping and
transport costs for the mass market furnishings; use innovative flat packaging
-
-
By shipping customers unassembled pieces in flat boxes, the costs for labor, shipping and
storage are significantly reduced for the customer and IKEA
Consumers can also pick up many products in the store, increasing market share and
enabling global expansion
 Embraced environmental concerns by using alternative and creative materials,
focusing on maximizing the use of raw materials and minimizing packaging waste
-
For example, constructed a storage system made out of recycled milk cartons
Also created a new packaging method for the LAMPAN in which the lampshade is used as
a bucket for the lamp base, thus reducing waste, package size and cost
 Entered the housing market with ‘live smart’ flat pack houses called BoKlok
-
-
Provides high-quality homes at affordable prices which are manufactured off site, allowing
for quicker build time and less waste
Whole wall sections are delivered to the site, complete with doors, windows and insulation
already installed
 Created inspirational, lifelike and convenient retail spaces that keep customers
coming back
-
Fully furnished and accessorized walk-through model homes and living spaces
Supervised children’s areas that replicate a typical Swedish farmhouse and forest
Sources: “IKEA West Chester Offers Swedish Furnishings & Meatballs as Ohio’s 1st IKEA Store Opens in Cincinnati Area”, BusinessWire, March 12, 2008; “Housing Expert – And not an Allen key
in sight”, DowJones, March 28, 2008; “In an IKEA state of mind; So much more than a store, It’s a Lifestyle”, DowJones, March 7, 2008
11
Global CEO Study 2008 | CP & Retail Perspective | October 2008
© Copyright IBM Corporation 2008
IBM Global Business Services
The Enterprise of the Future is…
Innovative Beyond
Customer Imagination
© Copyright IBM Corporation 2008
The Enterprise of the Future is… Innovative Beyond Customer Imagination
3 out of 4 CP company CEOs see rising customer purchasing power
as a positive, and plan substantial increases in investment
Rise of purchasing power in growth markets
and prosperity in Western economies
Related
Investment
Negative
impact
16%
No
impact
11%
%
27
INCREASE
28.3%
22.2%
Positive
impact
74%
 Retail CEOs view this trend less positively than
their CP counterparts, only 59% view it positively
 Retail CEOs plan to decrease related investment
Investment past 3 Investment next 3
years
years
 CP CEOs plan to capitalize on this dynamic by
focusing on new segments and markets, and
enabling these activities via new operations
Source: IBM Global CEO Study 2008, n (Global) = 609; n (CP) = 38
13
Global CEO Study 2008 | CP & Retail Perspective | October 2008
© Copyright IBM Corporation 2008
The Enterprise of the Future is… Innovative Beyond Customer Imagination
Increasingly informed and collaborative customers are also viewed
positively, but only limited investment increases are planned
Rise of the informed and
collaborative customer
Related
Investment
Negative
impact
19%
5
No
impact
16%
Positive
impact
66%
%
INCREASE
12.9%
13.5%
Past 3 Years
Next 3 Years
 Globally a 29% investment increase is
planned, in areas such as environmental
initiatives and transparency
 Retail CEOs plan a massive 51% increase in
investment in this area
“As our customers continue to change their focus in response to the evolving marketplace, we need
to position ourselves as an innovator. We need to be seen as someone with whom our customers
can collaborate in creating new experiences from which consumers can benefit.”
Source: IBM Global CEO Study 2008, n (Global) = 609; n (CP) = 38
14
Global CEO Study 2008 | CP & Retail Perspective | October 2008
R Hurlbut, CEO, Attune Foods
© Copyright IBM Corporation 2008
The Enterprise of the Future is… Innovative Beyond Customer Imagination
Although CP company brands are no longer their own, they can
influence perceptions by mastering the ‘Trust Triangle’
The Trust Triangle
Today’s empowered Omni Consumer
 Is an ‘information omnivore’ hungry
for information about companies,
products and services
 Distrusts many traditional information
sources
 Seeks trusted information to achieve
desired level of transparency
Information
 Providing information on supply
chain, governance, and finances
creates transparency
 Information must be delivered
where, when and how the omnivore
wants it
Trust
 The information required  Trust is only created
to retain trust continues
when transparency has
to expand and evolve
been delivered
15
Global CEO Study 2008 | CP & Retail Perspective | October 2008
© Copyright IBM Corporation 2008
The Enterprise of the Future is… Innovative Beyond Customer Imagination
New dynamics for CP are “your brand is no longer your own” and
empowered Information Omnivores are exerting greater influence
Act globally - upstream and downstream
 Unilever sources all tea from sustainable, ethical sources
 P&G introduces cold water detergents to reduce energy consumption
 Nestlé introduces recyclable water bottle requiring 30% less plastic
 Foster’s offsets all of the carbon emissions of new lager
 Danone partners with Grameen to address malnutrition in Bangladesh
 Clorox introduces line of biodegradable, 99% natural cleaners
Respect power of concerned individuals
 Parodied highly regarded advertising campaign to raise awareness
about massive deforestation for palm oil production
 Clip viewed by >250,000 people on YouTube in less than a week
Involve consumers directly in brands
 Numerous CP companies have enlisted consumers to create ads
 Heinz “Top This TV Challenge” attracted 4,000+ qualified entries and
5.2 million online views
 Dove received 1,200+ entries for “real ads by real women” contest
Source:
IBM Institute for Business Value, company websites, Unilever press release, 05/25/2007, BusinessWire 01/13/2005 “Procter & Gamble Launches Tide Coldwater”, Business Week
04/28/2008 “Danone innovates to help feed the poor”, Wall Street Journal 05/02/2008: “Unilever Does About Face on Palm-Oil”
16
Global CEO Study 2008 | CP & Retail Perspective | October 2008
© Copyright IBM Corporation 2008
The Enterprise of the Future is… Innovative Beyond Customer Imagination
Retailers are raising the bar in connecting with today’s consumer delivering products and offerings targeted to their varied needs
O Organics® is the
#1 organic food brand
in the U.S.
April 2008 – affordable, simple, healthy eating options
• Forms Better Living Brands™ Alliance to market O Organics®
and Eating Right™ food and beverage solutions across all
retail channels, food service and internationally
• Alliance includes manufacturing, marketing, consumer and
retailer communications, co-packing and distribution
June 2008 – childhood obesity and health
• Announces launch of Eating Right Kids line of 100+ items
• The health-oriented products for children will carry licensed
Warner Bros. images
May 2008 – connecting with consumers
• Line of store-brand products created with input and
recommendations from “real moms”
• Includes more than 80 products, including diapers, baby
wipes, lotions and formula
• Comprehensive support program includes branded website, in
store displays and shelf talkers with parenting tips
Source:
IBM Institute for Business Value, company websites, Progressive Grocer 05/12/2008: “Mother Knows Best, Just Ask Safeway”, Wall Street Journal 06/04/2008: “Safeway to Offer Health
Line for Kids”, Business Wire, 06/04/2008: “Safeway and Warner Bros. Consumer Products Announce…”
17
Global CEO Study 2008 | CP & Retail Perspective | October 2008
© Copyright IBM Corporation 2008
The Enterprise of the Future is… Innovative Beyond Customer Imagination
Nike has effectively linked runners from around the globe through a
combination of its Nike+ product line and web-based community
Consumers can purchase Nike+ products that:
• Leverage RFID technology to capture highly accurate
distance, pace and calorie information
• Deliver the information real time to the runner through a
wireless connection with their iPod
Through the global community runners can:
• Track their individual performance during each run
• Track their performance and achievement over time
Consumer can also:
• Purchase and download ‘custom’ music mixes via the
Apple iTunes service
• Challenge other runners from anywhere in the globe
(either as an individual or as part of a team)
18
Global CEO Study 2008 | CP & Retail Perspective | October 2008
© Copyright IBM Corporation 2008
P&G has been very successful to date in moving towards its goal of
50% of new products from outside of P&G labs, while achieving
impressive financial and market results
“Through Connect + Develop, P&G is seeking to build a global
innovation network by identifying and connecting with the talents and
technologies of today’s most prepared minds and capabilities.”
Online techniques
reduced new product
concept testing from
weeks to days
Partnered with Clorox
on a food-wrap
technology to get it to
market faster
P&G Equity Ventures
provides funding for
internal and/or
external start-ups
Industry leader in trade
customer collaboration
and integration
P&G Value Chain
Product
Develop
Proc
ure
Man
uf.
P&G found the perfect
complement to the Swiffer
brand in a hand-held duster
developed by a Japanese
competitor.
Logis
tics/
Distr.
Cons
umer
Mktg
.
Cust
omer
Mgm
t.
Several of P&G Olay Skin Care
products now utilize new pump
dispensers originally developed by a
European packaging products
company.
“We have more than doubled our
innovation success rate and more than
doubled the future value potential of the
innovations in our pipeline.”
By acquiring newly
introduced SpinBrush,
P&G was able to bring a
superior oral care brand
to market quickly,
without undertaking the
time and expense of
developing an entirely
new product.
P&G’s Results (since 2000):
• Grown sales more than 40%
• More than doubled profits
• Returned $11 Bn. to shareholders, and
• Nearly doubled stock price
Source: IBM Global Business Consulting Services research; P&G company web sites; Sykes Enterprises Press Release, 30 Jun 03; Business Week, 7 Jul 03; Oster Dow Jones Select, 17
Jun 03; PR Newswire, 17 Jun 03; Fast Company, Sept 03; http://www.ecom-ohio.org, July 2002; quotes from Harvard Business Review, McKinsey Quarterly, 2004 Annual Report
19
Global CEO Study 2008 | CP & Retail Perspective | October 2008
© Copyright IBM Corporation 2008
IBM Global Business Services
The Enterprise of the Future is…
Globally Integrated
© Copyright IBM Corporation 2008
The Enterprise of the Future is… Globally Integrated
Cluster analysis revealed four common approaches towards global
integration
Global Integration Approach
Global Focus
Local Focus
Actively enter new markets
Defend your core
Deeply change mix of capabilities,
knowledge and assets
Maintain current mix of capabilities,
knowledge and assets
Partner extensively
Do everything in-house
Globalize brands/products
Localize brands/products
Optimize operations
globally
Optimize operations
locally
Grow through mergers &
acquisitions
Grow organically
Strive for one culture
Drive multiple cultures
Extensive Globalizers (n=230), Consumer Products n = 15
Globalizers (n=246), Consumer Products n = 24
Blended Thinkers (n=131), Consumer Products n = 11
Localizers (n=140), Consumer Products n = 9
Source: IBM Global CEO Study 2008; n (global) = 747
MarketSight Category Name / Analysis Name: GI / Q11- Global Initiative Cluster
21
Global CEO Study 2008 | CP & Retail Perspective | October 2008
© Copyright IBM Corporation 2008
Cluster analysis of the responses reveal a higher proportion of
localizers among the Retail industry CEOs than found Globally
Cluster analysis* revealed four response groups
Global
Localizers
19%
CP
Retail
Extensive
Globalizers
31%
Blended
Thinkers
18%
Globalizers
33%
1. Extensive Globalizers: Highly networked business,
adopting a global approach to all elements of integration
2. Globalizers: Business which optimize globally, but
already have the capabilities, knowledge and assets they
need, and focus on a single not a multiple culture
Localizers
27%
Blended
Thinkers
24%
Extensive
Globalizers
24%
Globalizers
24%
3. Blended Thinkers: Businesses trying to optimize
through a mix of global and local approaches, with
multiple cultures
4. Localizers: Insulated business with a blended
growth approach
Source: IBM Global CEO Study 2008; n (global) = 747; n (Retail) = 49; * see appendix for details of cluster analysis
MarketSight Category Name / Analysis Name: GI / Q11- Global Initiative Cluster
22
Global CEO Study 2008 | CP & Retail Perspective | October 2008
© Copyright IBM Corporation 2008
The Enterprise of the Future is… Globally Integrated
Many CP CEO’s will invest to build capabilities, enter new markets
and globalize products, albeit to a lesser degree than their peers
3
Deeply change mix of
capabilities, knowledge
and assets
Partner
extensively
46%
-11%
50%
Actively enter
new markets
Globalize
brands/products
2
-5%
44%
43%
25%
+1%
1
0
1
2
43%
Maintain current mix of
10% capabilities, knowledge
and assets
39%
11%
36%
33%
-3%
3
Differentials50%
vs. Global sample
20%
Do everything
in-house
Defend
your core
Localize
brands/products
24%
25%
To benefit from global integration CP CEOs…
 Will invest in deeply changing core
and assets 26%
50%
24% capabilities, knowledge
 Are embracing an open approach to innovation and looking to partnerships to effect the
desired level of change
29%
35%
36%
 Plan significantly greater investment in new markets and globalizing products than CEOs of
their retail customers
* n = 73 (% in chart exclude responses "Not selected" and "Neither")
23
Global CEO Study 2008 | CP & Retail Perspective | October 2008
© Copyright IBM Corporation 2008
The Enterprise of the Future is… Globally Integrated
By partnering with local players in growth markets CP companies
can quickly gain distribution and access to local knowledge
Russia: partnering with leading snack
company to access 1,000 sales reps and
national distribution network
China: leveraging Coca-Cola bottling
partner’s 3,000 sales representatives and
524,000+ points of sale
“We have invested the time and resources to understand
each market, partnered with strong local companies, and
developed delicious products that we believe will appeal
to the unique tastes of the people in each country”
D Conant, President & CEO, Campbell Soup Company
Cautionary tales on entering growth markets abound, such as Groupe Danone’s
challenges with partner Zong Qinghou over distribution and manufacturing of
Wahaha in China
Source: IBM Institute for Business Value, Campbell Soup Company press release, July 9, 2007
24
Global CEO Study 2008 | CP & Retail Perspective | October 2008
© Copyright IBM Corporation 2008
The Enterprise of the Future is… Globally Integrated
P&G has proactively innovated their business model in response to
capture opportunities in the era of the globally integrated enterprise
Case Study of a globally integrated enterprise: Procter & Gamble
HQ (Ohio) manages 37
facilities in 21 different US
states and 99 facilities in 42
other countries
P&G merged with Bostonbased Gillette to create
world's largest consumer
products firm
P&G outsourced global business services
to IBM, including three key regional
centers, in Costa Rica, England and the
Philippines
P&G acquired Clairol from
New York-based BristolMyers Squibb
Strategic alliance with TaiGen
Biotechnology to further the
development and
commercialization of a new
antibiotic
P&G joined the new
University of Arkansas
Center for Innovation in
Healthcare Logistics as
affiliate partner
Australia, Russia and
Vietnam are three of 60
countries where P&G has
outsourced facilities
management to Jones Lang
LaSalle
A range of functions, from
financial and legal to
logistics and brand
management, are carried
out in countries such as
Morocco, South Africa
and Nigeria
Georgia-based Meredian
Inc has acquired an
extensive intellectual
property portfolio from P&G
25
Research & development of new
products and processes is
conducted in-house in a range of
centers, including the Philippines
and Beijing
Centers in Latvia, Romania, Kenya
and Saudi Arabia manage regional
brands and operations
P&G has outsourced a range of IT
services to Hewlett Packard, with that
work being carried out in centers
around the world, including India,
California and Poland
Global CEO Study 2008 | CP & Retail Perspective | October 2008
Shed
Retain
Partner
Expand
© Copyright IBM Corporation 2008
The Enterprise of the Future is… Globally Integrated
Carrefour’s extensive and expanding global presence is helping to
keep sales and profit afloat
 14,000 stores and 455,000 employees in 30 countries
 Implementing a ‘localized’ global strategy is proving to be successful
-
Recruiting local managers, giving them power to manage assortment,
pricing and marketing so stores are tailored to local market tastes
-
Giving priority to country’s own supply chain
• Locally supplied products currently comprise 90% of products in each
country
• 99% of the approximate 500,000 people working for Carrefour are local
 European operations, outside of France, have yielded the biggest
international sales gain, proving to be Carrefour’s major growth engine
-
38% of total company sales in 2006, 59% of stores and 37% of profits
 In Latin America, Brazil has become the 3rd most important contributor to
Carrefour Group sales after acquiring discount hypermarket Atacadao
 In Asia, China is expected to be a significant growth market
-
Opened 23 new hypermarkets in China in 2007, breaking their own records
40% of Carrefour’s stores are in secondary regions in China
Sources: “Strategic Focus: Carrefour”, TNS Retail Forward, January 2008; “At a Glance 2007”, groupecarrfour.com; “Carrefour: out with the old world, in with the new”, The Grocer, October 27, 2007
26
Global CEO Study 2008 | CP & Retail Perspective | October 2008
© Copyright IBM Corporation 2008
IBM Global Business Services
The Enterprise of the Future is…
Disruptive by Nature
© Copyright IBM Corporation 2008
The Enterprise of the Future is… Disruptive by Nature
Since 2006 CP CEOs have awakened to the importance and
opportunities of Business Model Innovation (BMI)
66%
 In the 2006 IBM Global CEO Study
only 10% of CP CEOs prioritized
business model innovation
 Specific areas of emphasis are:
• Focus on differentiating activities, and
32%
• Collaborate with external partners
 Other areas of attention include:
• Redefining existing markets, and
1%
Limited/No
BMI Focus
Moderate BMI
Focus
Strong BMI
Focus
• Reconfiguring the
product/service/value mix
Note: BMI = Business Model Innovation
Source: IBM Global CEO Study 2008; n (Global) = 1,106, n (CP) = 71
28
Global CEO Study 2008 | CP & Retail Perspective | October 2008
© Copyright IBM Corporation 2008
The Enterprise of the Future is… Disruptive by Nature
To drive BMI CP CEOs are focusing on differentiation, reconfiguring
the product/service mix, and redefining existing markets
Business Model
Innovation - Preferences
Industry model
20%
20%
10%
18%
18%
Multiple BMI types
19%
23%
1. Redefine existing markets
2. Create new industries
3. Enter new industries
20%
23%
Industry model
Revenue model
Revenue model
1. Reconfigure product /
service / value mix
2. New pricing structures
Enterprise model
Enterprise model
50%
39%
39%
Global
Retail
CP
1. Focus on differentiation
2. Collaborate externally
3. Work internally
“For us, enterprise model innovation is primarily
about having the right business model to enter
other markets and secure new capabilities.”
Andrew Brandler, CEO, CLP Holdings Limited
Source: IBM Global CEO Study 2008; n (Global) =757; n (CP) = 71
29
Global CEO Study 2008 | CP & Retail Perspective | October 2008
© Copyright IBM Corporation 2008
The Enterprise of the Future is… Disruptive by Nature
Li & Fung is well-positioned for the future - an innovative, globally
integrated organization
Li & Fung Limited: Growth through global integration
 Hong Kong-based Li & Fung Limited sources from virtually anywhere in the
world and builds customized solutions for its retail customers
-
Network of 10,000 suppliers and staff in 40 different countries
-
Orchestrating the supply chain for customers without owning any piece of it
 Li & Fung steadily moved up the value chain
-
Changing its capability and asset mix to provide more sophisticated and
profitable services
 Li & Fung is able to be both locally relevant and globally optimized
-
Established a significant onshore presence in the US to provide product
design and brand development services
-
Acquisitions are key to grow market share in target geographic markets
 Li & Fung is growing through global integration
-
30
Revenue CAGR 1992 to 2006 of over 22%
Global CEO Study 2008 | CP & Retail Perspective | October 2008
© Copyright IBM Corporation 2008
The Enterprise of the Future is… Disruptive by Nature
A growing number of CP companies are adopting industry model
innovation approaches to connect directly with end consumers
 Through a partnership with re-aqua, Unilever has leveraged its ‘Dove’ brand to
open 14 spa locations in the UK
 re-aqua is the UK’s leading collection of well-being and beauty therapy salons
and spas
 The spas provide a showcase for products and non-traditional sales outlet for
products typically sold through grocery and drug stores
 Mars, Inc. launched a direct to consumer outlet for its signature M&M candies
 Consumers can order customized M&Ms through a dedicated website
 Nestlé launched its line of Popularly Positioned Products (PPPs), products
specifically targeted at lower income consumers in the developing world
 Products consist primarily of dairy products, Nescafé and Maggi flavorings
 Sales of PPPs grew by over 25% to reach around CHF 6 billion in 2007
 The market for such products in Asia, Africa and Latin America is estimated at
over CHF 80 billion
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Global CEO Study 2008 | CP & Retail Perspective | October 2008
© Copyright IBM Corporation 2008
IBM Global Business Services
The Enterprise of the Future is…
Genuine, Not Just
Generous
© Copyright IBM Corporation 2008
The Enterprise of the Future is… Genuine, Not Just Generous
On a global basis, CEO-focus on environmental issues has doubled
although there are strong geographic differences
All Respondents’ focus on
Environmental Issues
Asia Pacific
21%
12%
18%
8%
2004
12%
2006
2008
EMEA
21%
15%
9%
“As the world becomes more
‘green’, we can replace a plasticbased music distribution system
with a waste-free music
distribution system.”
- Chris Gorog, CEO, Napster
“We must double our investment in
environmental areas.”
13%
- CEO, Industrial Products Co., Sweden
2004
2006
2008
Americas
2004
2006
2008
11%
12%
8%
2004
“Environmental issues are driving
entry into new market segments as
avenues of growth.”
- President and CEO, Automotive
Company, Australia
2006
2008
Source: IBM Global CEO Study 2008; All respondents n (2004) = 403, n (2006) = 760, n (2008) = 1,130
33
Global CEO Study 2008 | CP & Retail Perspective | October 2008
© Copyright IBM Corporation 2008
The Enterprise of the Future is… Genuine, Not Just Generous
The majority of CP industry CEOs see CSR as an opportunity, and
plan to sharply increase investments in this area
Increasing customer expectations
of corporate social responsibility
Negative
impact
6%
Related
Investment
33
No
impact
24%
%
INCREASE
20%
15.0%
11.3%
Past 3 years
Next 3 years
CP CEO investments will focus on:
Positive
impact
71%
• Environmental initiatives
• New products
“Our company is investing extensively in
corporate social responsibility. We need to be a
reference in this domain. As the leader of the
luxury industry, we have to stay ahead.”
Y Carcelle, Chairman and CEO, Louis Vuitton
Source: IBM Global CEO Study 2008, n (Global) = 609; n (CP) = 73
34
Global CEO Study 2008 | CP & Retail Perspective | October 2008
© Copyright IBM Corporation 2008
The Enterprise of the Future is… Genuine, Not Just Generous
Indeed many CP company have initiated activity across the full
spectrum of CSR activities
CP Companies that have focused their CSR
activities in the following areas
(Percent Responses)
100%
90%
80%
70%
52%
28%
60%
Activities
are mature
43%
50%
50%
8%
40%
30%
20%
41%
48%
43%
49%
Cost savings
Creating new
revenue streams
36%
10%
Activities
recently
started
0%
Compliance with
regulations and
standards
Strategic
philanthropy
Formal company
values system
“The consumer’s concept of quality will no longer be measured by only the physical
attributes of a product - it will extend to the process of how the product is made, including
product safety, environmental compliance and social responsibility compliance.”
V Fung, Chairman, Li & Fung
Source: IBM Institute for Business Value, CSR Study 2008, n (CP) = 29
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Global CEO Study 2008 | CP & Retail Perspective | October 2008
© Copyright IBM Corporation 2008
The Enterprise of the Future is… Genuine, Not Just Generous
However many CP companies are seeking growth without fully
understanding customer concerns and drivers
Many CP companies see the growth potential of
CSR, most don’t truly understand customer
concerns
 57% of CP companies are leveraging their CSR
activities to create new revenue streams…
Customer Knowledge Gap
(Percent Responses, CP)
66%
40
 … but 74% admit they don’t understand their
customers CSR concerns well.
Even those who do feel prepared to meet
customer concerns may be missing the mark
 66% believe they have sufficient information
about the sources of their products to satisfy
customer concerns…
 … but fully two-thirds of those leaders admit
they too don’t understand their customers CSR
expectations well.
%
CREDIBILITY
GAP*
26%
Have sufficient
information to satisfy
customer concerns
Understand
customers’ CSR
concerns well
* Difference or ‘gap’ between having information and
having the right information
Source: IBM Institute for Business Value, CSR Study 2008, n (CP) = 29
36
Global CEO Study 2008 | CP & Retail Perspective | October 2008
© Copyright IBM Corporation 2008
The Enterprise of the Future is… Genuine, Not Just Generous
Across a range of issues CP companies are working hand in hand
with reputable NGOs to burnish their responsibility credentials
“The Coca-Cola Company has launched a multi-year partnership with
WWF to conserve and protect freshwater resources, including seven of
the world’s most important freshwater river basins.”
“The Rainforest Alliance monitors and verifies that Chiquita's farms
abide by strong environmental and social standards, which have
positive impacts on rural communities and tropical landscapes..”
“Ülker supports the campaign “10 billion Oak trees” organized by
TEMA, the Turkish environmental protection foundation, of which Sabri
Ülker, Ülker’s Honorary Chairman, is among the founding members.”
“The Sierra Club today announced their partnership with Clorox’s
newly-launched line of Green Works cleaners, a breakthrough line of
natural cleaning products that are as effective as conventional cleaners
but made from plant-based ingredients.”
Source: IBM Institute for Business Value, World Wildlife Fund press release: 06/05/2007, Rainforest Alliance website: http://www.rainforest-alliance.org/news/2000/chiquita.html, Ülker company
website: http://www.ulker.com.tr/en/environment.aspx, Sierra Club press release 01/14/2008
37
Global CEO Study 2008 | CP & Retail Perspective | October 2008
© Copyright IBM Corporation 2008
The Enterprise of the Future is… Genuine, Not Just Generous
Marks & Spencer is integrating ‘Plan A’ throughout every business
aspect in order to make a positive impact world-wide
Named Dow Jones 2007 Sustainability Index retail sector global leader and
one of 2008’s World’s Most Ethical Companies by Ethisphere Institute
1. Climate Change: minimizing energy use, maximizing the use of renewables and
plans to make operations carbon neutral by 2012
- Reduced carbon footprint by 28% compared to 2005-2006
- Planted 10,000 trees to offset the emissions caused by home delivery of furniture
2. Waste: reducing packaging and eliminating transport of store waste to landfills
- Started recycling unsold food into biogas and fibre fuels
3. Sustainable Raw Materials: ensuring raw materials come from the most
sustainable sources available
- Incorporated Forest Stewardship Council certified materials into furniture, food
packaging, store décor and leaflets
4. Fair Partner: improving the lives of people in the supply chain and community
- Bought over one third of the world’s supply of Fairtrade cotton
5. Health: creating healthier lifestyles through product choices and clear labelling
- Removed all hydrogenated fats from M&S food products
- Highlighted healthy choices by using nutrition labels and color coded ‘traffic lights’
Source: marksandspencer.com - “How we do business” 2007 report; “2008 World’s Most Ethical Companies”, Ethisphere Magazine, June 3, 2008; DJSI Annual Review 2007
38
Global CEO Study 2008 | CP & Retail Perspective | October 2008
© Copyright IBM Corporation 2008
Are you building your Enterprise of the Future?
Building the Enterprise of the Future
HUNGRY FOR
CHANGE
Ad hoc and
reactive
change
Project
driven
change
Change
portfolio and
program
Anticipating
and proactive
change
Change
becomes the
strategy
INNOVATIVE
BEYOND
CUSTOMER
IMAGINATION
Customer
intelligence
Customer
information
transparency
Two-way
customer
interaction
Customer
collaborative
development
Expanding
customer
aspirations
DISRUPTIVE
BY NATURE
Exploring
Business
Model
Innovation
Experimentin
g with BMI
Implementing
BMI
initiatives
Multiple BMI
strategies
Radical and
pervasive
BMI
GENUINE,
NOT JUST
GENEROUS
Regulatory
compliance
Strategic
philanthropy
Values based
selfregulation
Efficiency
through CSR
CSR as
growth
platform
GLOBALLY
INTEGRATED
39
Global CEO Study 2008 | CP & Retail Perspective | October 2008
© Copyright IBM Corporation 2008