Dong Bae Park Director

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????? .companyTM Transformation ??
Dong Bae ParkDirector Ernst Young Korea
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From mature company to .company...
CEO Agenda
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What does a CEO Agenda look like?

• The determinants of wealth creation are changing
• Traditional financial measures growing less
  important
• Market-to-Book continues to increase
• Relationship between financial performance and
  stock price changes increasingly weak
• Investments in intangibles such as RD, brand
  development and training can exceed total
  investments in tangible assets

4
Growth has eclipsed Profit in driving SHV
today...
Fortune 500 Market Capital Growth
Faster
Operating Profit Growth
Average
Slower
Slower
Faster
Average
Revenue Growth
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And the importance of intangibles has grown
Dramatically
Sales Growth
Current Market Cap
Sales
Net Income
Amazon.com BN DELL COMPAQ CISCO 3COM
610M 2.8B 12.3B 24.5B 8.5B 5.4B
312 14 59 0 32 72
-125M 53M 940M -2.7M 1.3B 300M
36B 1.6B 110B 42B 307B 14.9B
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The past ten years have seen a growing
disconnection between financial performance and
value
SP 500 (10 yr. example)
4
Mkt Value
3.5
3
2.5
2
Normalized Value
Earnings
1.5
Book Value
1
0.5
0
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
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Future Expectations are being driven by
Intangibles
Brick Companies
Click Companies
100

• The importance of intangibles is growing for
  Brick companies as they transform to take
  advantage of the connected economy.
• The Dot-Coms are challenged to deliver on their
  promise by linking valuable intangibles with
  traditional assets to generate profitable growth

Market Value
Market Value Drivers Unexplainable Non-Financial
Value Drivers FinancialPerformance
Market Value Drivers
EY/Wharton Research, 1999
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Capturing Full Market Potential requires a New
Business Model
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The StraightEightsSM Framework Positions the How
and the What
.company Wealth
.company Operations

• Identifies how dotcoms and mature
  companies transform themselves

• The economic substance of what a .company is

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.company Wealth Is
Intangibles

• Intangibles
• Non-physical sources of future economic benefit
• The ratio of total market capitalization to total
  invested capital

• Profit
• Measures the current period economic return
• ROIC or after-tax return on invested capital

Profit
G
P
Growth

• Growth
• Focuses on the velocity of near-term revenue
• Most recent FY change in total revenue

• Technology Utilization
• The application of technology to drive innovation
• Index is based on the Information Week 500 survey

TU
TechnologyUtilization
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Examples of What A Mature Company Needs To
Improve Wealth Creation

• Growth
• Customer insights
• Innovation process
• Platforms
• NPD and launch capabilities
• Deeper customer relationships
• Brand portability
• Strategic acquisitions

• Intangibles
• Credible eCommerce strategy(B2C,B,E)
• Aggressive implementation plan
• Strategic acquisitions
• Some proof
• Public relations

Mature Company Example

• Profit
• World-class shared services
• Outsourcing non core functions
• Enterprise management software
• Timely, accurate reporting systems
• Reliable, efficient Value WebsSM

• Technology Utilization
• Supplier portals
• Customer portals
• Employee online self service
• Legitimate Web presence
• Compelling GUI
• Customer online interaction analytics

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.company Operations Is
0
0
Rigid Reactive Real-Time Anticipate
Speed
Connectivity
Non-Integrated Stand-Alone Connected Networked
C
Connectivity
8
8
10
10
Speed
E
S
Execution
0
0
Separate Linked Bundled Blurred
Offer
Variable Stable Expandable Scaleable
Execution
O
Offer
8
8
10
10
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Examples of Operational Connectivity
???? Network ?? ?? ???? Connectivity Networked

• METRO?? ?? ???? ???? Travel and Expense Report?
  ??? ???, Supplier? ??? ????? ?? ???? 48?? ?? ????
  ??? ????? ???.
• ?? ??? 83? ??? ??? marketplace?? ????? ???.
• ??? ??? ?? ????? ???? ??? ?? ??? ?? ????? ?????
  ?? ?? ??? ????? ??????? ????? ???.
• ??? ???? ?? ????? ?? Self-help Solution? ??? ? ??.

Internet Portal? ?? ?? Connectivity Networked

• 50? ?? ??? ????? ??? ???? ?? Catalogue Index?
  ???? ??.
• Contents? ??? ???? ???? ??? ? ??.
• ?? ???? ???? ?? ?? Offer? ???? ??.

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Examples of Operational Offer
Online Bookstore? ???? Offer Blurred

• ??? ??? ???? ?? ???? ??? ?? ??? ????, ??? ?? ??
  ??? ??? ? ???, ??? ?? ??? ?? ????.
• Stickiness? ????? ?? ??? ?? ??? ?? ?????(?? ???
  ?? ?? ??? ?? ?? ???) COIN(?? ? ??, ?? ?? ??? ??
  ?)? ????? ???.

C
6
E
S
6
8
8
O
?? ??? ?? ?? ?? ???? Offer Blurred

• ??? ??? ????? ??? ?? ?? ??, ?? ??, ?? ??? ??, ???
  ??, ????? ???, ?? ??? ??? ?? ??, ?? ?? ?? 20 ??
  ?? ??? ????? ?? ? ??.
• (???? ????) ??? ???, ???, ?? ??? ??? ???? ?? ??
  ???? ?? ?? ??? ?? ????, ??? ?? ???, ? ?? ?? ????
  24?? ???? ???? ??.

C
8
E
S
5
7
8
O
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Examples of Operational Speed
???? Network ?? ?? ???? Speed Anticipate

• 10? ?? ??? Switching? 90? ?? ???? ??? ??? ???.
• 1991??? ???? ?? ??? ???? ??.
• ?? ?? ??? ???? Optical Transport ? Switching????
  ??? ??? ??.

Online Bookstore? ???? Speed Anticipate

• Electronic Category Killer?? Broad-band eTailer?
  ?????? ??? ? ??? ?? ??? ?? ??? ???.
• ?? 2?? ??? ????? ???? ??? CD, ???, ??, ???, ??,
  ??? ??, ?? ??, ??? Zshop ?? eCommerce link?
  ?????.
• ??? ???? ???? ?? ??? ??? ????? ??? Offer? ????
  Challenge? ?? ?????.

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Examples of Operational Execution
???? Network ?? ?? ???? Execution Scaleable

• ??? ??? ??? ??? ?? ?????? ?? ??? ? ???, ??? ??
  ??? ????? ???.
• ????? ????? ?? ?? ?? ??? ?? ????? ?? ? ??.
• ??? Factor Floor ??? ?? ?? ?????? ????? ???? ??.
• ??? ?? ???? ??? ??? ??? ?? ????? ???? ??? ???.

Online Auction Service ?? Execution Scaleable

• ??? ????? ??? ??? ??? ?? ??? ??? ??? ??? ? ????
  ???.
• Inventory? ??? ?? ?? ???? ???.
• Back-end ??? ??? Outsourcing?? Bandwidth Capacity
  ??? ?? ???.

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Assessment of Operational Drivers Will Be
Collected Using our Interview Guides
Straight EightsSM Operations Assessment

• Bundled
• Is the offer defined, packaged, and marketed to
  address the customer's complete need or
  experience?
• Do offers involve add-on or follow-up sales of
  ancillary items or services?
• Are pricing, packaging, or other means used to
  encourage customers to buy related products and
  services together?
• Are the customer's purchase patterns captured and
  used to direct the customer to offers that add
  extra value?
• Are versions of the offer available to the
  customer at or approaching 11 customization?
• Can the offer be personalized?
• Can the customer define or configure the offer?

Assessing the Offer

• Separate
• Are products and services sold separately, with
  no add-on or follow-up sales?
• Is each transaction treated as mutually
  exclusive, rather than building on a relationship?

• Linked
• Is the customer connected to value web partners
  to complete, enhance, or expand the offer?
• Is the actual fulfillment agent (value web
  partner) of any part of the offer transparent to
  the customer?
• Do variable configurations of value web partners
  participate in defining or fulfilling offer?

• Blurred
• Is information content used to add value to the
  physical product component of the offer?
• Is the transaction spread over a period of time,
  or does delivery of the offer take place over an
  indefinite period of time?
• Is the transaction open-ended (that is, without a
  definitive endpoint)?
• Are offers sold, tracked, or designed as part of
  a lifecycle relationship?
• Does the transaction involve an exchange of value
  from the customer (information, loyalty, etc.) to
  the client that can be used to create additional
  value in future transactions?
• Is profitability tracked by total offer rather
  than individual product or service components?

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The StraightEightsSM Framework Provides EY A
Unique Point-of-View of the Companys Situation
and the Alignment of Our Service Line and
Market-based Offerings

• Breakthrough Offerings
• Connected Strategy and.company transformation
• Consumer Exchange
• eOffer
• eCRM
• eProcurement
• eFulfillment and Trading
• Communities
• Communities and Portals
• EC Backbone
• Connected Finance
• Connected HR
• mySAP.com
• eNcub_at_tor

• connect!now Service Lines
• Strategy
• eCommerce
• CRM
• NPD
• Supply Chain
• Support Services
• Critical Technologies
• ERP

StraightEightsSM
Our market-based offerings are aligned with our
clients situation and their CEOs wealth
creation agenda
Our global service lines are leveraged to
create market-based offerings for the Connected
Economy
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The StraightEightsSM Operations Diagnostic Will
Provide Insight Into Which Core, Enhanced and
Breakthrough Service Offerings Affect the
Transformation
.company Operation Drivers

• Breakthrough Offerings
• Connected Strategy andTransformation
• Consumer Interaction
• eOffer
• eCRM
• eProcurement
• eFulfillment and Trading Communities
• Communities and Portals
• EC Backbone
• Connected Finance
• Connected HR
• mySAP.com
• eNcub_at_tor

• n n n n½ ½ ½ ½
• ½ ½
• ½ ½ ½ ½
• ½ ½
• ½ ½
• ½ ½
• ½ ½
• ½ ½
• ½
• ½
• ½ ½
• ½ ½ ½ ½

• the desired improvement in specific drivers
  will define the transformation programs and the
  required solutions

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Creating a New Business Model for the Value Web
Suppliers
Standard Channel Sales
Direct Fulfillment Providers
Internet
Logistics Service Providers
NewChannels
Contract Manufacturers
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.companiesTM operate by excelling in four
dimensions
Connectivity
C
E
S
Execution
Speed
O
Offer
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Ernst Young eCommerce Framework
Transformation
eInformation
eCommerce
eCompany
eEconomy

• General portals

• Focused eUtilities for market commerce
• Market portals

• Combine offer with business partners
• Market utility
• Make new markets

• Hybrid markets
• Virtualized value network
• Market, not brand, identity

Marketplace

• On-line catalogs
• Company/product information
• FAQs
• Electronic coupons

• On-line customer orders
• On-line product configuration
• Order settlement

• Virtual sales/distribution
• Open enterprise to customers/suppliers
• Flow through orders
• Loyalty programs

• Channel portfolio optimization
• CRM for market
• Market loyalty program

GROWTH
Customer Connections

• Informated products
• Research supply base
• Electronic product information
• Push/pull supplier information

• eProcurement
• Electronic distribution
• Data sharing with suppliers
• On-line commitment

• Micro-transactions
• Direct fulfillment
• Integrated distribution

• Market inventory
• Market orders
• Market distribution
• Market of one

Supply Chain

• On-line manuals
• On-line directories
• On-line communications
• Job postings

• On-line TE
• Benefits selection
• Training registration
• Knowledge dissemination

• Distance learning
• Employee self-service, HR, travel, knowledge
• Employee as customer

• Employee portals
• Market administration utilities

Support/ Employee
EFFICIENCY

• Secure site
• Web infrastructure
• Reliable source
• Log-on name

• Secure transactions
• Web integration
• Trusted transactions
• Individual identity

• Secure company
• End-to-end integration
• Trusted company
• Confirmed identity

• Secure market
• Market integration
• Trusted 3rd party
• Encrypted identity

Fundamentals
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(No Transcript)
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.companies create breakthrough wealth!
Intangible
G
P
Growth
Profit
TU
Technology Utilization
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A .company has achieved an 8 position on all
eight drivers both the external .company Wealth
and the internal .company Operations