A Revolution is Coming in How Business Marketers Create Value Across Industries & Markets

September 19, 2017

A REVOLUTION IS COMING IN HOW BUSINESS MARKETERS CREATE VALUE ACROSS INDUSTRIES & MARKETS

Erich Joachimsthaler, Ph.D./Founder & CEO of VIVALDI/

TECHNOLOGY

An Explosion of Connected Possibilities

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YEARS OF 1960s – 1970s

Pipeline (Traditional Value Chain) Business

R&D Production Distribution Customer

Automation of individual activities in the value chain Standardization of processesCompetitive advantage: quality at scale

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Pipeline (Traditional Value Chain) Business

YEARS OF 1980s – 1990s

R&D Production Distribution Customer

Rise of the internet, ubiquitous connectivityCoordination and integration across individual activities and suppliers, channels, and customers Global supply chainDeliver value by means of production (lowest cost per unit)Competitive advantage: differentiation through featuresVIVALDI 4

Connectivity of EverythingTechnology evolution from cloud, social and mobile to Internet of Things, AI, quantum computing, etc.Deliver value by means of interaction (more value as the number of users and interactions go up)Competitive advantage: Not just the product but the platform

TODAY

Platform Business

Producer Customer

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JOHN DEERE’S 8R / 8RT 24-ROW EXACTEMERGE PLANTER

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• Top speed 10 miles/hour• 80 seeds per second• Tractor has 20 processors• Planter has 77 processors• 6 million lines of code• Sends data to the tractor cab to JDOC (AWS)• Connects tractor operator and remote farm manager• Connects machines with one another• Coordinates work in the field

GPS calculate machine’s position – 2.5 cm10 % cost savings by avoiding overlapping fields

1) MARKET – MYJOHNDEERE ENABLES A PLATFORM THAT CREATES VALUE FOR FARMERS

2) ENABLING TECHNOLOGY THAT GENERATES DATA AND ANALYTICS AND AN EXCHANGE

Deere Open Data PlatformIntelligent farming

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3) ECOSYSTEM – CUSTOMERS INTERACT WITH EACH OTHER AND THIRD-PARTIES

Seed densitydepth

fertilization

THIRD-PARTY DEVELOPERS LIKE FARMERS BUSINESS NETWORK ADD VALUE

Access the largest seed performance database in agriculture, powered by millions of acres of real yields — all farmer driven, totally independent, and unbiased

MyJohnDeere Operations Center users can link their MyJohnDeere accounts to FBN Analytics for hourly data transfer

So far, 39 agriculture tech startups have partnered with John Deere, adding dozens of additional valuable services to its ecosystem

John Deere Vision

From sellingand servicing big equipment

To a commitment to those linked to

the land

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4) GRAVITATIONAL PULL OF MAJOR STAKEHOLDERS

Attracts stakeholders- Farmers

- John Deere dealers- Software companies- Seed and fertilizer manufacturers- University researchers

WHAT MAKES A GREAT PLATFORM?

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• Creates value on the top of technology for all parties

• Facilitates interactions and collaboration between parties

• Open, third-party developers or ecosystem

• Draws in stakeholders (gravitational pull)

• INDEPENDENT PRODUCER - DISTRIBUTORDuisburg, Germany; 110 years old

• REVENUES 2016$6.7 billion globally (75% global; 40% in the US)

• EMPLOYEES 20178,700

• COMPETITORSReliance Steel & Alum ($8.6 bn), Ryerson ($3.2 bn), and Russell Metals (C$27.7 bn)

CUSTOMERSHigh fragmentation

• ARCELOR MITTAL$56.8 bn revenues

• THYSSENKRUPS$46.4 bn revenues

• TATA STEEL$18 bn revenues

• SALZGITTER$10 bn revenues

THE STEEL BUSINESS – WHAT ARE YOU SOLVING FOR?

Pipeline (Traditional Value Chain) Business

Production Distribution Customer

Lots of inventory everywhereHigh inventory levelsLong delivery timesNo effective information and data exchangePoor pricing transparencyVIVALDI 19

STEEL MARKETING, SALES AND SERVICE

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PRICE TRANSPARENCY FROM NEW STARTUPS

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VERY UNATTRACTIVE INDUSTRY

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When a management with a reputation for brilliance tackles a business with a reputation for bad economics, it is the reputation of the business that remains intact.

Warren Buffett

HOW DO YOU HELP THIS CUSTOMER?

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Suppliers: poor utilization of production assets; Customers: poor pricing transparency; Distributors: inventory levels

Revenues2016 - $600 million2017 - $1 billion (to date)2019 - $4 - $5 billion (est.)

1) MARKET – CREATING A PLATFORM TO CONNECT WITH KLOECKNER’S 200,000 CUSTOMERS

INTERACTIONS

Producer Customer

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Key Success FactorsNeeds to fit into the ERP of customersCreating value for all parties involved

THE CONTRACT PORTAL ENABLES FRICTIONLESS CONTRACT MANAGEMENT

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Supplier

Launch: Three Months from Start

2) ENABLING TECHNOLOGIES AND PROCESSES

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Cloud IT INFRASTRUCTUREGoogle Cloud, SAP Hybris

KLOECKNER CONNECTContract Portal, Online Shop, Ordering Tools

AUTOMATION, AI, SOFTWAREAera, Arago, Sage

CONSULTING WORKBrand, Marketing, Digital Transformation, Technology

3) THIRD-PARTY PLATFORMS ACCELERATE DEMAND GENERATION AND FULFILLMENT

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IntegrationProduction of Trumpf communicates fully digitally when Kloeckner needs to deliver

Open PlatformExpand to include competing sellers/distributors in 2017

Laser Technology

Steel Trading

CustomersLogistics Integration

4) GRAVITATIONAL PULL OF MAJOR STAKEHOLDERS

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“We like to be the Amazon ofsteel distribution.”

Gisbert Rühl, CEO

Competitors

Employees

Research Institutes

RelianceSalzgitter

Tata SteelArcelorMittal

ThyssenKrups

VELOCITY AND SPEED OF VALUE CREATION

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ORGANIZATIONKloeckner.iKloeckener.v

BRANDCustomer relationshipsDeep industry knowhowReliability and trust

EXPONENTIAL TECHNOLOGIESBig data analytics, data mining and machine learningKiana Systems (DFKI spinoff)

BEST RESULTS IN SIX YEARS

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PLATFORMS SCALE EXPONENTIALLY

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Platform Ecosystem

Traditional Pipeline

Number of Users and Interactions

Valu

e

SOURCES OF THE NETWORK EFFECT

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CONNECTIONNetworks become more useful as a user’s connections increase

CONTENTUsers discover and use data or information created by other users

CLOUDInfluential users advocate value of platform on the cloud

Pipeline Platform

Features Goals

Differentiation Goal Achievement

Relevance to Needs Share of Requirements

Transaction Relationship

Linear Growth Exponential Growth

Supply-side Economies of Scale Demand-side Economies of Scale

Production Interactions

PIPELINES VERSUS PLATFORMS SUMMARY

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HOW TO GET STARTED

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• What is the vision or what are you solving for?• What existing assets and capabilities can we leverage? What parts of the business create

competitive advantage through network effects?• How can we enable deeper relationships with customers, and other stakeholders in the

ecosystem and create value for everyone?• How will we configure the platform? What implications does this have for the culture, business

model, processes, leadership, infrastructure, customer experience?• What new capabilities, skills and talent do we need to collaborate and compete effectively in a

platform world?• What new business models should we deploy to capture the value and profit opportunities from

platforms?

Thank you

Erich Joachimsthaler/Founder & CEO of VIVALDI/

ej@vivaldigroup.com

New York | Chicago | London | Zurich | Munich | Düsseldorf | Hamburg | Singapore

www.vivaldigroup.com

@ejoachimsthaler